The SMSF Association has called for the government and other AFCA subsectors to “meet the shortfall” of Compensation Scheme of Last Resort claims.
The recommendation was part of the association’s submission to the government’s consultation of funding the CSLR subsector levy which has exceeded the $20 million cap for financial advice.
SMSF Association chief executive Peter Burgess said the federal government should also share part of the responsibility is because it’s the only stakeholder that has the power to control the regulatory settings that participants operate in.
“Given this, we believe the government should also be responsible for funding part of the special levy,” Burgess said.
“While the need for a special levy was considered in the design of the CLSR as a key funding mechanism for a ‘black swan’ event’ following a large failure, it was not designed to fund the flock of black swans that we have experienced and appear to continue to experience in recent times.”
The government was meant to pay for the first year of the CSLR, which turned out to only be the final three months of the financial year when the scheme launched at the start of April last year.
The total advice remediation for FY26 is $67 million, and by law, the government is required to create a special levy to fund the excess.
The consultation outlined four options: taking no action, spreading compensation over time, a special levy for the primary subsector (financial advice), or spreading it out across different subsectors.
The latter option, the consultation paper listed 21 potential retail-facing subsectors used in the ASIC Industry Funding Model and set out five sub-options: spreading the levy equally, by “population”, by revenue, by profit or by “regulatory effort”.
The Treasury consultation highlighted the capacity for different ASIC subsectors that fall under the regulator’s industry funding model to pay, but the SMSF Association suggested the special levy be shared by other AFCA subsectors.
Burgess said AFSLs who are AFCA members are not responsible for this shortfall and there’s no element in the CSLR funding model that is predicated on direct industry culpability.
“In these circumstances, we believe the most effective way to quickly compensate eligible claimants is to spread the cost of the special levy across all sub-sectors,” Burgess said.
Burgess also pre-emptively dismissed the complaint from other subsectors that they shouldn’t be required to pay for claims unrelated to their own subsector.
“But the reality is that the current CSLR model is not equitable – each sub-sector is mandated to fund compensation for the misconduct and deliberate negligence of their peers over which they have no control nor influence,” Burgess said.
The Financial Advice Association Australia had previously released its submission to the consultation which warned the government that failing to address the funding model would leave deep-rooted problems with the CSLR unaddressed.
