SMSF Association Media Release
The most efficient and equitable way to fund the special levy needed to meet the shortfall in consumers’ unpaid compensation claims is to spread it across all Australian Financial Complaints Authority (AFCA) sub-sectors based on their capacity to pay.
That’s a key recommendation in the SMSF Association’s submission to the Treasury consultation on the Compensation Scheme of Last Resort (CSLR): exceeding sub-sector levy caps.
While the estimated $47 million shortfall for 2025-26 is attributed to the financial advice sub-sector, Association CEO Peter Burgess said AFS licensees who are AFCA members are not responsible for this significant and concerning shortfall in potential unpaid compensation claims.
“There is no element of the current CSLR’s industry funding model that is predicated on direct industry culpability for instances or classes of misconduct.
“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 taken at face value it may seem inequitable for a sub-sector to fund unpaid claims for another sub-sector.
“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.”
He said the Federal Government should also share part of the responsibility.
“The Government is the only stakeholder that has the power to enact and affect the regulatory settings that participants must operate within. Given this, we believe the Government should also be responsible for funding part of the special levy.
“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.”
Burgess said the Association strongly supported the CSLR’s objective of giving consumers access to financial compensation where they suffered a financial loss from poor or negligent financial advice.
“Consumers should have trust and confidence that awarded compensation claims will be paid, and in a timely manner, making it imperative that the right mechanism is chosen the meet the funding shortfall.”