David Berry

The FY26 Compensation Scheme of Last Resort estimated levy has been downgraded by almost $3 million to an estimated $75.7 million.

In an announcement on Friday afternoon, the CSLR said the need for a revised estimate was triggered by the initial levy estimate exceeding the $20 million cap for the financial advice sub-sector.

From 1 July, the CSLR can notify the Minister for Financial Services, now Dan Mulino, of the need for a special levy and the scheme confirmed it has informed the minister of the need to fund $47.3 million above the subsector cap.

Conducted with actuarial partner Finity, three of the four industry sub-sectors saw a decrease, with the advice sub-sector estimate falling by $2.82 million.

The Finity actuarial report said the main driver of change in the revised estimate is AFCA’s processing of complaints, and other assumptions that were not available at the time of the initial estimate.

This included the number of open AFCA complaints as of 31 May; updated AFCA estimates for complaints processing for Dixon Advisory and United Global Capital; and an update to unpaid AFCA fees.

Comparison of initial and revised CSLR levies

Sub-sector Initial levy estimate (Feb) Revised levy estimate (June)
Financial advice $70.110 million $67.289 million
Credit provisions $2.799 million $1.853 million
Credit intermediation $2.723 million $1.833 million
Securities dealing $2.343 million $4.723 million
Total $77.975 million $75.698 million

Source: CSLR.

The revised $4.7 million estimate for the securities dealing sub-sector will be funded by the CSLR’s cash reserves and recovered in the FY27 annual levy for securities dealing.

The CSLR assumed the failure of United Global Capital would lead to 334 claims and 307 of them would be paid out in FY26.

Brite Advisors is expected to be another emerging factor in the CSLR calculations as AFCA has already received 618 complaints about the business that offers an investment platform to self-invested personal pension providers, qualifying recognised overseas pension schemes, and self-managed superannuation funds.

ASIC commenced action against Brite because the firm failed to lodge financial statements and auditor’s report for FY22 to ASIC.

ASIC said it was concerned that the financial position of Brite, and the value of client funds under its management, were unknown. However, the CSLR believes Brite managed as much as $1 billion of client money.

Brite had its AFSL cancelled after a determination from AFCA went unpaid, and the claim went to the CSLR which paid out $21,888.20.

Dixon has 1017 open claims with AFCA with only 66 closed; UGC has 600 open with 84 closed; and Brite has 613 open with five closed.

The CSLR assumed it would pay 101 claims for Dixon from the FY26 levy, which has since been revised to 78 claims; 307 UGC claims have reduced to 292.

Number of assumed CSLR claims paid in FY26

Firm Initial estimate Revised estimate Difference
Dixon Advisory 101 78 -23
United Global Capital 307 292 -15
Brite Advisors 10 +10
Other advice 28 101 +73

Source: CSLR.

The Financial Advice Association of Australia and SMSF Association urged the government to expedite the review of the CSLR that it commissioned back in January after it was informed the advice levy would breach the sub-sector cap.

“In the face of the further deterioration in the long-term outlook for the CSLR, it is increasingly critical that Government steps in to fix this problem,” FAAA chief executive Sarah Abood said.

“We are keen to see the release of the Treasury report into the CSLR and the Government’s response. The problems will rapidly get substantially worse if urgent action is not taken, putting the ongoing existence of the scheme at risk.”

But Abood warned the decrease in the levy is only because of a delay in the processing of known complaints, not because of a reduction in expected claims. The delay will simply push further costs into FY27.

CEO Peter Burgess said the revised estimate, when coupled with the special levy, is still “too high” for the sector to sustain.

“While the revised estimate is slightly lower than the initial estimate of $70.1 million, we are bitterly disappointed with the quantum of the levy amount that punishes the vast majority of advisers who act in the best interests of their clients,” Burgess said.

The CSLR previously announced that levies it had already collected from FY25 had not been spent with the leftover expected to be carried forward into a future levy period.

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