Treasury continues to skirt around Senate’s CSLR questions

Financial advisers looking for answers to questions surrounding the construction of the Compensation Scheme of Last Resort (CSLR) and what was known about the Dixon advisory collapse are no closer to getting them despite Treasury being probed at Senate estimates late last year.

Senator Andrew Bragg put a number of questions related to the CSLR to Treasury officials on 15 November 2024. Treasury took the questions on notice and should have provided a response in January; however, it failed to meet that deadline.

Taking to LinkedIn more than a month ago, Financial Advice Association Australia (FAAA) general manager of policy advocacy and standards Phil Anderson asked why there had been such a delay.

“They are really good questions and we are really keen to get answers to these questions. This is particularly important in the context of the announcement today on the huge CSLR Levy for 2025–26,” Anderson said.

“Unfortunately, these questions are marked as unanswered and overdue. Clearly well overdue.”

He added: “Come on Treasury! Two and a half months is heaps of time to answer these important questions.”

Well, Treasury has finally “answered” the questions; however, they provide little substance and continue a pattern of perfunctory responses on the topic of the CSLR.

“When the government tabled the Compensation Scheme of Last Resort legislation in March 2023, had Treasury done a projection or estimate of what this would cost the 10 largest financial institutions, the government and the financial advice profession?” Bragg asked in November.

“What did that estimate suggest the cost would be?

“Given that the Dixon Advisory collapse was well known at that time, and the administrator had issued a creditors report in November 2022, stating that 4,606 clients had lost $368 million, why didn’t Treasury make this information available to the Parliament?

“Did Treasury recommend any changes to the scheme’s design at the time or warn the government about the risks of the levy blowing out for years to come?”

Rather than deliver straightforward, clear answers to the inquiries, Treasury opted instead to explain the total cap on the CSLR of $250 million and the subsector caps of $20 million, before adding that “uncertainty” hampered efforts to estimate costs.

“Whilst the government has periodically sought to estimate the impact of the scheme, there have been a significant number of unknowns and uncertainties in relation to these estimates,” Treasury said.

“For example, claims in relation to Dixon Advisory & Superannuation Services Pty Ltd were still in the process of being lodged with the Australian Financial Complaints Authority (AFCA), and there was significant uncertainty as to the outcome of these claims at AFCA and the Compensation Scheme of Last Resort (CSLR).”

Bragg also asked why Treasury recommended increasing the subsector caps from $10 million to $20 million, and whether Treasury anticipated “that the Dixon collapse would result in the cap being exceeded”.

“The intent of the CSLR, consistent with the Ramsay review, is that the subsector that causes the need for compensation should bear the cost in the first instance, which is reflected by the subsector cap,” Treasury responded.

The second part of the question was ignored entirely.

The only question Treasury directly answered is one that has been well explored since Bragg raised it: what options the minister has to deal with levies that exceed the sector cap.

History of skating around questions

In written questions on notice as part of the Senate estimates process in June last year, Bragg directed a series of thorny questions to Treasury regarding the impact of the Dixon on the construction of the CSLR.

Bragg had asked whether the CSLR bill’s explanatory memorandum made any reference to Dixon Advisory, given more than 1,600 complaints had been made ahead of its drafting, and “If not, then why not?”

“The explanatory memorandum for the CSLR package of bills that were introduced on 8 March 2023 did not include any references to Dixon Advisory or to any of the other insolvent entities,” Treasury said, not providing a response to the senator’s secondary question, similar to the lack of response in the latest set of questions.

In a second LinkedIn post before Treasury had responded to Bragg’s questions, Anderson argued it “should not take three months to provide these answers”, also raising concerns on what this means for the Treasury review of the CSLR.

“The minister has asked Treasury to do a comprehensive review of the CSLR, however their failure to answer these questions makes me a little apprehensive about whether they are the appropriate party to do this,” he added.

Speaking with ifa in February, Anderson argued that a lot of the problems with the scheme’s operation are already “well known”, with a range of stakeholders detailing the issues in their submissions to the Senate inquiry into the Dixon Advisory collapse.

“We want action,” he told ifa.

“We don’t want sitting around for months waiting for action to be taken when there is no certainty of when that will occur.

“The problems are already known, the need for the government to take action has been fundamentally clear for a very long time.”