Anderson predicts significantly higher CSLR levy in 2025–26

The Financial Advice Association Australia (FAAA) is asking for urgent government intervention on the Compensation Scheme of Last Resort (CSLR), citing the unexpected scale of the levy and its focus on addressing legacy issues.

Joining the ifa Show podcast this week, the FAAA’s general manager of policy advocacy and standards, Phil Anderson, pointed out a number of issues regarding the manner in which the CSLR burden imposed on advisers has been calculated.

First and foremost, he said, advisers are being charged for legacy issues, meaning they’re being asked to cop the cost of complaints received against Dixon Advisory in the period preceding the royal assent of the CSLR legislation.

As such, the FAAA wants to see the government pick up the entirety of the legacy Dixon Advisory matters.

“The business went into administration in January of 2022. The legislation for the CSLR was not passed until June of 2023, so nearly a year and a half later. It received royal assent in early July of 2023. We do not believe that this legislation should be applied retrospectively, and if we are required to pay for complaints that were submitted after the 7 September 2022, but before the legislation was passed, we think that’s wrong,” Anderson said.

“We think that there should not be a retrospective application of the law here. The vast bulk of those post-7 September 2022 Dixon complaints were received in September and into October of 2022. If you take out all of the Dixon Advisory matters, that would be a good outcome. That would significantly reduce the cost. But we would certainly argue that we should not be paying for Dixon Advisory matters that were received prior to royal assent in July of 2023.”

The bottom line, Anderson said, is financial advisers are “paying for stuff that we thought would be picked up by the government in the first year of the scheme”.

Namely, the government had at the onset of the scheme committed to paying for the first year of the CSLR’s operations, however, it is now absorbing only three months of costs.

“The original proposal was that the government would pick up the cost for the first 12 months of the scheme. In reality, they are only picking up the cost for the first three months of the scheme. So the scheme only opens on the 2 April and then the first period runs to the 30 June,” Anderson said.

“So, the government gets off almost scot-free because of a combination of factors, the combination being this huge number of complaints that AFCA has to deal with and the time it’s going to take them to deal with that, and also the fact that they have truncated that first year period down to just three months.

“So, when we look at this, we’ve got the 10 largest financial institutions paying $241 million for complaints from the commencement of AFCA in November of 2018 through to the 7 September 2022. We’ve then got this period of time that the government is responsible, but it is in the end, it turned out to be only three months and are only paying 4.8 million. And then there are all these remaining post-7 September 2022 Dixon Advisory complaints that go into another bucket, that gets paid for by the advice profession.”

Moreover, Anderson pointed out the cost will only get higher in financial year 2025–26. Namely, according to estimates drawn up by the Actuaries Institute, AFCA will need until the March quarter of 2026 to complete the processing of legacy Dixon Advisory matters.

“We are talking about the prospect of an even larger number in the financial year 2026,” Anderson said.

“So, this is an issue that we need to argue strongly for, not only this year or the year that’s coming up, but the following year. So, it’s not just about $1,200. It’s probably significantly more in the 2026 year that we certainly want to see the government come to the party on.”

To hear more from Phil Anderson, click here.