Concerns mount CSLR levy could hit $50m

On Wednesday, the Compensation Scheme of Last Resort (CSLR) said it expects the upcoming 2025–26 levy attributed to personal financial advice to exceed the $20 million subsector cap.

According to the CSLR, the process of confirming the levy estimate is “complex and heavily dependent” on both the Australian Financial Complaints Authority’s (AFCA) estimates of how many complaints will be resolved and proceed to the CSLR in FY25–26, and “the inclusion of any other large-scale firm failures”.

Speaking with ifa, Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards, Phil Anderson, said the levy figure clearing the $20 million cap didn’t surprise him.

Anderson, who met with CSLR leadership on Wednesday, said: “They are still working through what they think it might be next year. They’ve got actuaries that they’re working with on this targeting to have a legislative instrument released at the end of January or early February of next year.

“So they’ve got another three months to get it all crunched. There’s the speed with which AFCA are processing these Dixon Advisory complaints, and it’s also the emergence of other matters that might add to the bill for the 25–26 year.

“But the practical reality is that we have around $135 million that will need to be paid for by the advice profession, or someone else on behalf the advice profession, over the course of the next three or four years.”

He added that if there is a delay in AFCA’s processing of complaints related to Dixon, then the number may not be “as bad as the worst case" scenario – a subsector total above $50 million.

“If you think $135 million across four years, in 24–25, Dixon Advisory makes up about $11 million of that. So that gives you $124 million,” he said.

“If you had $50 million in 2025–26, $50 million in 26–27, then you got roughly $24 million left for 27–28. It’s a matter of whether that peak gets pushed back.

“If it’s going to take four years to process all these Dixon Advisory complaints, then we’re going to see some big numbers in the next few years.”

Advisers to be ‘slugged’

The opposition, meanwhile, said the CSLR’s announcement is a blow to advisers, with shadow financial services minister Luke Howarth observing that the sector is “set to be slugged with an even bigger levy than this year”.

“The Albanese government is struggling to legislate even its highest priorities, and the advice community is right to doubt whether the government will act quickly, or even at all, to address the CSLR levy’s blowout,” Howarth said in a statement to ifa.

“The government was aware the estimated bill for advisers for this year would exceed $18 million in March. It then watched on as hundreds of new complaints flowed in up until the June deadline – bringing the future industry funded bill to $130+ million.”

He added that despite the originally proposed subsector cap being raised from $10 million to $20 million, advisers still “face the risk of the minister using his power to sign off on additional levies”.

“The government also reneged on covering the first year of the scheme, instead only paying three months and leaving advisers to pick up the bill,” Howarth said.

“The government’s recent mea culpa on the CSLR by supporting a Senate inquiry is welcomed but more urgent action is required. With time running out before an election, the government must work quickly to ensure financial advisers aren’t lobbed with another excessive levy next year. It can’t wait for the outcomes of an inquiry to start making changes to limit the damage.”

While Financial Services Minister Stephen Jones has a number of options available to him in handling a levy that exceeds a subsector cap, it is currently unclear which route he will decide to take.

According to Anderson, the hope is that the minister will spread the load across a number of subsectors.

“At the end of the day, our primary goal within the current legislation – so this is excluding the prospect of legislation for a more serious fix – is to ensure that any excess above the sector cap is picked up by other sectors, and that we’re dealing with a maximum of $20 million in in any one year,” he told ifa.

“I know that this is going to be uncomfortable for many, but maybe that is not such a bad outcome. We don’t want to be paying that, but if we contrast that with what a worst case could be – if you had to pay $50 million in any one year, that’s talking about $3,000 [per adviser].

“So, our current policy priority is to get confidence that the government and the minister in particular, would not choose to allocate anything in excess of $20 million in any one year to the advice profession, and that invariably means over the course of the next three years, other sectors would need to be asked to contribute.”