The industry’s share of the Compensation Scheme of Last Resort (CSLR) has been a point of contention for many brokers, so news that they were facing a significantly higher bill for 2026–27 understandably went down like a lead balloon.
High-profile failures in the financial advice sector have driven up the scheme’s funding requirements, leaving consumers with significant unpaid compensation determinations.
In September, Treasury released its draft levy plan, following July estimates that claims, fees, and costs for the scheme would reach $198.07 million in 2026–27.
The lion’s share of this amount – around $190.3 million – was attributed to the personal financial advice sub-sector, exceeding the $20 million cap on annual levies for an individual sub-sector.
That $170.3 million shortfall has sharpened the debate over how the scheme’s costs should be shared.
Under the final special levy allocation, determined by Assistant Treasurer and Minister for Financial Services Daniel Mulino on 12 October, credit intermediaries were hit with a $7.79 million special levy, up from $668,000 last year.
Back-of-the-envelope calculations from the Mortgage and Finance Association of Australia (MFAA) set this cost at approximately $67 per credit representative, up from $5.72 last year.
So, how did the CSLR reach this point? Why is the broking industry being asked to foot such a hefty bill? And what does this mean for the future of the scheme?
How the bill adds up
The CSLR was introduced to compensate eligible consumers who have suffered financial loss due to misconduct by a financial services provider and are unable to recover the money owed to them, with costs shared across relevant industry sub-sectors.
Under the legislative framework, the scheme’s independent operator estimates the total funding required for each levy period, while the Australian Securities and Investments Commission (ASIC) issues levy notices and collects payments.
The framework for calculating these costs is now a “special-levy waterfall”, introduced by the federal government in August.
Under this approach, the sub-sector most closely connected to the claims is considered first, followed by other connected sub-sectors and, if necessary, a wider funding base.
The framework allocates special levies sequentially across three tiers.
Under Tier 1, the primary sub-sectors can be levied up to $20 million each once their annual levy cap has been exceeded.
Tier 2 applies to sub-sectors deemed sufficiently connected to the losses, which can be levied up to $40 million each.
The remaining sub-sectors fall under Tier 3, with a cap of $30 million per sub-sector. This includes any sub-sectors levied under Tier 2 that have not reached their $40 million cap.
And this is what makes the latest special levy particularly contentious.
Under Treasury’s final determination for 2026–27, $10 million was allocated to the personal financial advice sub-sector, in addition to its $20 million annual levy, while $40 million was allocated to responsible entities of managed investment schemes.
The remaining special levy was distributed across other sub-sectors, leaving credit intermediaries footing the bill for a $7.79 million contribution.
The industry reacts
The MFAA was among the organisations that raised questions with Treasury during the consultation on the allocation in late September, before the final determination was made.
Almost all of the increase traces back to financial planning and advice sector failures, not to anything in broking
– Melissa Ashcroft, managing director, AAA Mortgages
CEO Anja Pannek says the association’s submission questioned the proposed contribution from the financial advice sector and whether businesses more closely associated with the losses should shoulder a greater share 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,” she says.
“We have also asked whether other sectors more closely connected to the losses should contribute before the remaining costs are shared more broadly.”
Central to the MFAA’s concerns was 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 says.
Pannek also warned the proposed levy would add to the regulatory and operating expenses facing businesses, regardless of how the final allocation is determined.
“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 says.
While $67 might not break a brokerage today, what happens when that becomes $200, $500, or more tomorrow? Without proper safeguards, we’re effectively handing the industry a blank cheque for failures it may have had no involvement in
– Bernard Desmond, CEO, Blank Financial
“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.”
Several brokers also raised concerns when speaking with The Adviser’s sister brand, Broker Daily.
Melissa Ashcroft, managing director of AAA Mortgages, says the levies would have significant implications.
“Almost all of the increase traces back to financial planning and advice sector failures, not to anything in broking,” she says.
“Seems like brokers will, as part of the scheme, be footing a bill that is not ours to carry.”
Ashcroft added that while she supported the principle of the CSLR, she questioned its funding model and warned that the precedent could cost brokers significantly more in future.
“When costs from other parts of the financial services sector flow through to brokers at this scale, it starts to look less like a shared safety net and more like brokers underwriting other industries,” Ashcroft says.
Bernard Desmond, CEO of Victorian brokerage Blank Financial, echoed these concerns, warning that the levy could set a precedent for future costs.
“A jump from $5.72 to $67 per credit representative isn’t a minor adjustment. It’s an almost twelvefold increase, and it raises serious questions about the sustainability and fairness of the scheme,” Desmond says.
“Brokers who do the right thing shouldn’t continually be asked to pick up the bill for those who don’t.
“While $67 might not break a brokerage today, what happens when that becomes $200, $500, or more tomorrow? Without proper safeguards, we’re effectively handing the industry a blank cheque for failures it may have had no involvement in.”
