Brokers to pay 1.4% share of special CSLR levy

As such, the CSLR notified the Minister for Financial Services earlier this year that a special levy of $47.3 million would be needed for this financial year.

A consultation was undertaken earlier this year seeking feedback on how this levy would be funded. Three options were explored, including:

• Spreading compensation payments over time.

• Applying a special levy to the primary subsector.

• Extending the levy to other subsectors.

Submissions from the broker associations urged the government not to apply the special levy to mortgage brokers; however, the government has now confirmed that it will broadly apply the special levy to CSLR subsectors.

Mulino announced on Wednesday (10 December) that the special levy will be applied across the finance industry to “reduce the burden on any one subsector and to ensure of the sustainability of individual subsectors and the CSLR as whole”.

The financial services sector will bear the largest share of the levy, contributing about $10 million (22 per cent).

Credit providers will contribute just over 15 per cent (around $6.8 million), responsible entities about 13.7 per cent (around $6.2 million), and super trustees 12.9 per cent (around $5.9 million).

All remaining subsectors will each account for less than 10 per cent of the total levy.

For mortgage and finance brokers, the contribution is just 1.4 per cent (or approximately $7 per credit representative, totalling around $667,529 across the sector).

On Wednesday (10 December), Mulino hosted a roundtable to discuss the special levy and some of the options on the table for post‑implementation reform.

Mulino commented: “Financial collapses have an impact on the industry, with increased pressure on the Compensation Scheme of Last Resort (CSLR).

“Supporting consumers includes ensuring the CSLR is there to support them when they need it.

“A special levy of $47.3m will apply for the financial year 2025–26 to fund the increased call on the CSLR this year. This will be applied broadly to reduce the burden on any one subsector and to ensure of the sustainability of individual subsectors and the CSLR as whole.

“We are acting in partnership with industry and consumer advocates.”

The Mortgage & Finance Association of Australia (MFAA) attended the roundtable and noted that the Assistant Treasurer had called the decision to spread the levy across all sectors a "difficult" one.

MFAA CEO Anja Pannek said the outcome was "disappointing" for the broking industry and thousands of small broking businesses.

“This is an additional cost burden for our members and the industry,” Pannek said.

“We acknowledge the Minister’s transparency in [the] roundtable and welcome the broader reform program he outlined to improve the long-term sustainability of the CSLR.

“The sheer magnitude of the levy, not only in FY26, but also what has been flagged for FY27, highlights how critical it is that steps be taken to address the root cause of misconduct."

However, the MFAA CEO said the association was "firm" in its position.

She added: "[M]ortgage and finance brokers, who have one of the lowest levels of misconduct across the financial system, should not be required to cross-subsidise compensation for failures occurring entirely outside the credit intermediaries sub-sector in perpetuity.

“We deeply empathise with consumers impacted by advice failures, with many having to wait for up to eight years for redress. But fairness matters. Levies should reflect actual sources of misconduct, and long-term CSLR sustainability must be achieved without imposing regressive impacts on low-risk, small-business sectors," she said.

Reforming the CSLR

First launched in 2024, the CSLR is an independent, not-for-profit body authorised by the Australian government that facilitates the payment of up to $150,000 in compensation.

The organisation aims to offer recompense to consumers who have received a favourable determination from the Australian Financial Complaints Authority (AFCA), but haven’t been paid by the financial firm responsible for the complaint due to insolvency.

However, the scheme has come into question after figures released in February showed levy estimates for the FY26 had roughly tripled to a combined $77.97 million across all subsectors, from $24.1 million a year before.

As it stands for FY26, the credit intermediation subsector – which includes brokers – is expected to pay $1.8 million, down from the original estimate of $2.7 million as part of the CSLR. (CSLR levies were reduced by 32 per cent in July, following revised estimates.)

Moreover, the initial estimate for the fourth levy period (FY27) for the CSLR is set to be the largest to date. A total levy of $137.5 million will be needed for the upcoming financial year to cover an expected 912 claims, but this may rise further.

The overall estimate marks a substantial increase from the revised $75.7 million figure for the prior financial year, highlighting the sustained impact of large financial firm failures on the industry-funded scheme.

The estimate is dominated by the personal financial advice subsector, which will need to pay $126.9 million, vastly exceeding the legislative $20 million subsector cap. This will cover more than 1,000 complaints, 474 of which related to Dixon Advisory.

Mulino has now revealed that the Treasury will next year release an options paper on post‑implementation reform of the CSLR to “address potential structural and technical changes to the scheme itself to ensure it remains sustainable”.

This is expected in “early 2026”.

He said: “Building trust in the financial system will support the Government’s productivity agenda. Defective schemes attract funds that should otherwise support innovation and economic growth. And when financial schemes collapse, investor confidence diminishes alongside. Australians become more cautious about investing and this can tarnish even legitimate, well‑regulated products.

“This work will maintain confidence in the Australian financial system, paying dividends for consumers and the economy as well as delivering a stronger superannuation system so Australians can have a dignified retirement.”

The Assistant Treasurer and Financial Services Minister also outlined that the government is also considering “targeted reforms” to deal with the high-pressure sales tactics across the whole ecosystem and will consult on these early in 2026.

Alleged practices employed in the cases of the Shield and First Guardian Master Funds reportedly include “high-pressure lead generation pushing people to switch their retirement savings into higher-risk environments and products such as low‑quality managed investment schemes”, Mulino said.

He continued: “The Albanese Government is acting to strengthen consumer protections and improve stability and confidence in the superannuation and financial services sectors which are critical to investment and productivity.

“We need to ensure consumers continue to have trust in the superannuation system to help them provide for their own retirement…

“We want to ensure consumers can be properly informed before making the decision to switch what are now large sums of superannuation savings, and more protected when they switch.

“Switching to a better-performing superannuation fund can significantly improve the retirement outcomes for Australians, however, the decision to move requires careful consideration.”

The MFAA said the association would work with the Treasury and the CSLR on the CSLR reforms, stating: “We continue to support a fair, sustainable and well-targeted framework. The coming review is an important opportunity to address structural drivers of misconduct, improve recoveries from wrongdoers, and ensure the CSLR remains true to its purpose as a genuine ‘last resort’ scheme.

“Any future approach on the CSLR must recognise the positive outcomes delivered by mortgage and finance brokers.”

[Related: FBAA and MFAA warn CSLR levy risks unfairly penalising brokers]