Treasury’s draft levy plan is set to impose a large CSLR charge on credit intermediaries.
Credit intermediaries, the financial-services sub-sector covering mortgage and finance brokers, would pay a proposed $7.79 million special levy under Treasury’s first application of its new Compensation Scheme of Last Resort (CSLR) waterfall framework.
The proposed levy would lift the sub-sector’s total CSLR contribution for 2026–27 to about $9.9 million, after including its estimated $2.2 million annual levy.
It is a substantial increase on the $667,529 special levy paid in the financial year 2025–26 and comes as industry bodies have repeatedly said brokers should not be required to fund losses arising in unrelated, higher-risk financial-services sectors.
The proposed allocation was slammed by Greg Ashe, director of compliance and regulatory consultancy QED Group, who said the model would force industries outside personal financial advice to fund the consequences of its failures.
“I see a lot to be really aggrieved about. This is unashamedly all about everyone else subsidising failure in personal financial advice," Ashe said.
A $170m shortfall
Treasury opened targeted consultation this week on how a $170.26 million special levy should be distributed after the CSLR operator’s revised estimate showed claims, fees, and costs for 2026–27 would reach $198.07 million.
Of that total, $190.26 million was attributed to the personal financial advice sub-sector.
As ASIC can collect no more than $20 million annually from that sub-sector, the remaining $170.26 million would be funded through the special levy.
New waterfall model
The consultation marks the first operational use of the government’s rules-based waterfall framework, announced as part of Financial Services Minister Daniel Mulino’s CSLR reform package unveiled in August.
Under the draft approach, levy costs would be applied across three tiers.
The primary sub-sector associated with the losses pays up to $20 million under Tier 1; sectors sufficiently connected to the losses can pay up to $40 million each under Tier 2; and the balance is then spread across remaining retail-facing financial-services sub-sectors under Tier 3.
The financial advice sector is proposed to contribute an additional $10 million under Tier 1, on top of its $20 million annual levy.
Responsible entities of managed investment schemes would provide $40 million under Tier 2, while the remaining $120.26 million would be allocated among the 21 retail-facing sub-sectors through Tier 3.
Higher bills flagged
Ashe said the proposed special levy would substantially increase the amount paid by credit licensees and credit representatives, despite the underlying shortfall being overwhelmingly associated with personal financial advice claims.
“Levies are going to be almost five times what they otherwise would have been charged were it not for topping up financial advice," Ashe said.
"It will mean an extra fee of $165 for each corporate and natural persons in this year, on top of their ‘standard’ fee, that will be about $200 per CR for the year instead of $38.”
Ashe added that CSLR funding should more directly rest with the sectors responsible for generating the claims.
“Costs should remain in the silos in which they are borne. If that means sending some dodgy financial advisors out of business, that’s probably a good thing. Abolish all sector caps," he outlined.
He also argued that the consultation’s scope did not adequately confront the fundamental policy choice behind cross-sector funding.
"The questions for consultation are lame, narrow and probably concern the least offensive elements of this proposal." Ashe noted.
“The bigger, unasked question is ‘Do you think it is reasonable for other sub-sectors to have to cross-allocations?’ to which the answer is a resounding no.”
Test of connection
Central to the new model is Treasury’s proposed threshold for whether a sub-sector is sufficiently linked to losses to be charged under Tier 2.
The consultation paper said the test would require more than a peripheral connection to a failed product or arrangement.
“To be considered ‘connected’ under Tier 2 of the waterfall framework, a product, service or regulated activity must have formed a substantive part of the pathway to consumer loss,” the discussion paper said.
“This may include material involvement in creating, distributing, acquiring or continuing the harmful product or arrangement. Incidental, routine, administrative or merely facilitative involvement, such as banking, payments, settlement, custody or administration, would not be sufficient without evidence of substantive involvement.”
The consultation seeks feedback on whether the prescribed entity metrics used for allocations could produce material adverse outcomes in any sub-sector.
The largest share of the special levy is linked to advice-sector losses, including claims associated with Dixon Advisory, United Global Capital, Brite, and the Shield and First Guardian product failures.
The CSLR operator said its revised 2026–27 estimate increased by $60.6 million from the initial $137.5 million estimate, largely due to additional Dixon Advisory claims and the first tranche of Shield and First Guardian matters.
The size of the proposed bill is likely to sharpen scrutiny of the funding model from the broking sector.
The Mortgage and Finance Association of Australia (MFAA) has consistently backed the CSLR’s consumer-protection purpose while maintaining that its financing should remain proportionate, evidence-based, and aligned with risk.
It has previously warned against brokers cross-subsidising higher-risk sectors and has stressed that mortgage and finance broking has very low CSLR claim and complaint volumes.
Treasury said feedback from the consultation would shape both the final 2026–27 determination and the framework’s future operation. Submissions close on 5 October 2026.
[Related: CSLR levy jumps $60.7m after revision]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
