MFAA challenges proposed 1,000% surge in brokers’ CSLR levy

In an email to National Aggregator Forum members seen by The Adviser, MFAA CEO Anja Pannek questioned the escalation in the sector’s contribution as Treasury considers how to distribute the scheme’s growing funding shortfall.

“For credit intermediaries, Treasury is proposing an allocation of approximately $7.8 million, compared with around $668,000 last year. Based on our indicative calculations, this could equate to approximately $67 per credit representative, compared with $5.72 last year. These are estimates only, and the final amounts have not yet been determined,” Pannek said.

The special allocation is additional to ordinary annual funding, which the CSLR operator’s revised estimate put at $2.1 million for credit intermediation.

Challenging how the bill is shared

Treasury opened targeted consultation on 21 September, marking the first application of the waterfall framework announced in Financial Services Minister Daniel Mulino’s August reform package.

The proposed $170.26 million special levy comprises $10 million from financial advice, $40 million from responsible entities of managed investment schemes, and $120.26 million across 21 retail-facing subsectors.

The advice contribution is additional to its $20 million annual levy. Tier 1 allows another contribution of up to $20 million, while connected sectors can contribute up to $40 million each under Tier 2.

The association has taken its concerns directly to Treasury, seeking an explanation of the calculations and opportunities to reduce the credit-intermediary allocation.

“The MFAA has made a submission to Treasury seeking to better understand how the proposed costs have been calculated and to explore opportunities to reduce the contribution from our sector,” Pannek said.

Pannek said the submission questioned the additional advice-sector contribution and whether businesses more closely associated with the losses should shoulder more of the bill.

“In particular, we have asked Treasury to reconsider why the proposed contribution from the financial advice sector is $10 million when the framework allows for up to $20 million. We have also asked whether other sectors more closely connected to the losses should contribute before the remaining costs are shared more broadly,” she said.

Central to the MFAA’s concerns is the distinction between responsibility for the consumer losses and the obligation to help fund compensation.

“While mortgage brokers and aggregators were not responsible for the underlying consumer losses, the CSLR funding framework allows some costs to be shared more broadly across the financial services industry,” Pannek said.

Questions over methodology

Pannek also identified ASIC’s regulatory activity as relevant to the allocation methodology, but stopped short of attributing the proposed amount to particular broking reviews.

“The proposed allocation is based on a methodology linked to ASIC’s regulatory effort across different sectors. ASIC has undertaken considerable work in mortgage broking, including its review of compliance with the Best Interests Duty and its focus on fraud,” she said.

“This provides some context for the methodology, although the extent to which these activities have influenced the proposed allocation is not yet clear.”

Turning to the underlying funding pressure, Pannek pointed to major financial advice failures as the principal drivers of the scheme’s expanding costs.

“The scale of the scheme’s costs has increased substantially, driven by significant claims associated with financial advice failures, including Dixon Advisory, Shield and First Guardian,” she said.

“CSLR costs have increased significantly. Estimated compensation and scheme costs have risen from $75.7 million in 2025–26 to $198.1 million in 2026–27, reflecting a substantial increase in expected claims.

“The proposed special levy for 2026–27 is approximately $170.3 million, compared with a $47.3 million funding shortfall last year.”

Pannek warned that the contribution would add to regulatory and operating expenses already being absorbed by businesses, beyond the dispute over how costs are distributed.

“We recognise that the proposed levy represents a potentially significant additional cost for mortgage brokers, aggregators and credit licensees, particularly given the broader regulatory and operational costs already faced by businesses,” she said.

“Our focus is on working constructively with Treasury to ensure the funding arrangements are applied fairly, the impacts on our sector are properly considered and the costs are minimised wherever possible.”

[Related: Draft CSLR special levy slammed as brokers face hefty share]