A public consultation process has been announced by the Treasury to help determine how the $47 million above the financial advice subsector cap will be paid.
Financial Services Minister, Daniel Mulino, has directed Treasury to consult on the statutory options available to deal with the Compensation Scheme of Last Resort (CSLR) 2025–26 revised claims, fees and costs estimate.
At the start of July, the CSLR operator released the FY25–26 revised levy estimate, which lowered the amount attributable to the financial advice subsector to $67.3 million. However, as this is still significantly above the $20 million subsector cap, the CSLR now notified Mulino of the need for a special levy of $47.29 million.
Treasury’s consultation paper, released on 1 August, said the purpose of the consultation is to “seek stakeholder views on options” for how Minister Mulino should exercise his ministerial powers.
“The consultation takes place in the context of the post-implementation review of the Compensation Scheme of Last Resort announced by the government on 31 January 2025,” it said.
Treasury also said that the feedback would also inform the CSLR post-implementation review, scuppering any hope that the findings would be released soon.
Under the Corporations Act, the minister has a range of options at his disposal to deal with the amount above the subsector cap.
Broadly, these options include spreading the compensation payable by the CSLR over a longer period of time, applying a special levy to the subsector that has exceeded the cap, or applying a special levy across additional subsectors as well.
Importantly, as the consultation paper noted, the minister’s “power to exercise these options is discretionary” and there are no requirements for a particular action and, indeed, no time frame for the minister to make the decision.
The options available to Mulino are also not mutually exclusive, and he can choose to make a determination that “both imposes a special levy and spreads compensation out over a longer period, and may choose to make a determination that imposes a special levy that does not recover the full amount of the excess”.
“In circumstances where an amount that is less than the full excess is levied (including when no special levy is imposed), the amount of shortfall would be added to the CSLR operator’s estimates for subsequent levy periods,” the paper said.
Responding to the announcement, Financial Services Council (FSC) chief executive Blake Briggs said the FSC would “closely review the options outlined in the consultation paper”.
“The industry welcomes the minister’s engagement on the CSLR special levy,” Briggs said.
“In considering whether and how to determine a special levy, the minister should have regard to the risk of entrenching further moral hazard into the scheme through underwriting investment losses, the financial sustainability and viability of subsectors, and spreading the cost as widely as possible to minimise the burden on any one sector.”
He also urged the minister to “prioritise responding to the outcomes of Treasury’s review of the design of the scheme”, which was first announced in January.
“That review was established to assess the scheme’s framework, scope and sustainability on an ongoing basis. If the industry is going to bear the costs of the $47 million special levy, the industry needs assurance that the scheme will not continue to blow out year on year,” Briggs said.
“Already we have seen the scheme blow out by 840 per cent from Treasury’s initial estimate of $8.1 million per year to $75.7 million. It is simply not sustainable to have an indeterminate and growing liability being imposed on the parts of the sector doing the right thing, to pay for the sins of others.”
