ISCOVER
Credit intermediaries will see levies from the Compensation Scheme of Last Resort reduced by 32 per cent, following revised estimates.
The Compensation Scheme of Last Resort (CSLR) has today (4 July) released the FY2025–26 revised levy estimate, bringing down levy estimates for credit intermediation.
For the upcoming financial year, it is expected that the credit intermediation sub-sector – which includes brokers – will pay $1.8 million, down from the original estimate of $2.7 million.
The number of assumed CSLR claims paid in the FY25–26 levy period for credit intermediation has been revised down – from 10 to three.
The need for a revised estimate was triggered due to the initial levy estimate, issued in January 2025, exceeding the $20 million sub-sector cap for the personal financial advice sub-sector.
After working with its principal actuary, the compensation body has now issued revised estimates for the 2026 financial year.
All sub-sectors – apart from securities dealing – have seen reduced estimates. This sub-sector has had an upward revision to estimates, growing from $2.3 million to $4.7 million.
The $2.4 million increase will be funded by CSLR’s cash reserves and recovered in the FY2026–27 annual levy for securities dealing.
Meanwhile, the personal financial advice sub-sector will see a decrease of $2.8 million – with the Minister for Financial Services now being notified by the CSLR that a special levy of $47.3 million will be needed.
The CSLR has confirmed that no further special levy considerations are necessary for credit provision or credit intermediation.
Overall, the total estimated levies charged to the financial services sub-sector will decrease from just under $78 million to $75.7 million.
Commenting on the revision, David Berry, CEO of the CSLR, said the harm caused by those in the finance sector doing the wrong thing disproportionately impacts and detracts from those acting correctly, noting that the rate and number of firm failures show little sign of abating.
“Whilst we are disappointed at the need for a special levy, we recognise these funds provide a measure of compensation for those who have experienced lengthy and stressful financial loss,” Berry said.
“The CSLR continues to operate in alignment with the legislative framework in a manner that is effective, efficient and economical as we strive to increase consumer trust across the financial services sector.”
Commenting on the new estimates, the executive, policy and legal at the Mortgage & Finance Association of Australia (MFAA), Naveen Ahluwalia, commented:
“It’s pleasing to see that the CSLR is expecting to receive fewer unpaid determinations for the broking sector. This is a clear sign that the broking sector continues to thrive, to produce good consumer outcomes with minimal complaints and minimal unpaid determinations.”
Ahluwalia noted: “We understand the levy for credit representatives remains unchanged at the $52.04 per representative reported in January – this is because of legislative processes that have occurred. However, if the revised estimates result in a surplus, this will be carried forward as a credit for future years.”
She added: “We need a more sustainable funding model for the CSLR and look forward to the outcome of the Treasury review.”
The CSLR revised estimates come after the financial services regulator also released its estimates for the latest levies on industry, which will see levies charged to the broking industry double as a result of increased regulatory action.
What is the CSLR?
First launched in 2024, the CSLR is an independent, not-for-profit body authorised by the Australian government.
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.
It facilitates the payment of up to $150,000 in compensation.
But projected cost blowouts in the recent levy period – related to the collapses of Dixon Advisory and UGC – have brought the CSLR under scrutiny.
In December, for example, the Mortgage and Finance Association of Australia (MFAA) provided a submission to a Parliament inquiry into the collapse of Dixon Advisory, encouraging former assistant treasurer Stephen Jones to “balance fairness and sustainability” when determining how the finance industry will cover the excess costs.
The submission said: “Placing a disproportionate financial burden on a sector with minimal claim activity not only challenges the principles of equitable treatment but also risks creating incentives that allow higher-risk sectors to rely on cross-subsidisation rather than addressing risk exposures within that sub-sector.”
The MFAA has welcomed calls for the CSLR review, with CEO Anja Pannek noting the broking sector accounted for just 3.6 per cent of pre-CSLR claims determinations.
“The levy for credit representatives is increasing from $33.85 to $52.04 per credit representative. This is largely due to increased operational costs rather than claims from our sector,” Pannek said.
“Small businesses are, in effect, paying for the running of the scheme – we will be questioning whether this is fair.”
The MFAA has also questioned whether it is equitable for “small broking businesses to be paying for a scheme that compensates for losses in other financial services”.
“AFCA reporting shows that post-CSLR, there have been no unpaid determinations from the credit intermediary sector – something that comes as no surprise to us,” Pannek added.
“The mortgage broker best interests duty (BID) is serving consumers well and is embedded in the broking industry.
“Our industry is demonstrating positive customer outcomes, and in the unlikely event that things go wrong, our members have professional indemnity cover in place to respond.
“The costs of the CSLR must be fair and proportionate for the broker industry, and the broker industry should not be funding losses that have originated in other financial services sectors.”
The review of the CSLR is ongoing, and, as such, any changes to the scheme may affect the estimated levies.
[Related: Government urged to not burden brokers with special levy]
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