Financial industry associations, including major insurance bodies, are pressing for changes to the timetable and design of Australia’s Compensation Scheme of Last Resort (CSLR) as levy estimates increase and special levies are used across multiple years.
Members of the Financial Industry Council of Australia (FICA) participated in a roundtable hosted by Assistant Treasurer and Minister for Financial Services Daniel Mulino to discuss the current CSLR excess levy and the longer-term framework for the scheme.
FICA restated its support for the CSLR as a mechanism to deliver compensation to eligible consumers who cannot obtain redress from failed financial firms. The council said its members back recent government moves to consult on design changes so the scheme operates strictly as a last-resort compensation mechanism.
At the same time, FICA pointed to ongoing concerns about the pace of reform. The council said consultation on changes intended to make the CSLR “fair and sustainable” from FY26 should be completed before detailed decisions are taken on managing any FY27 excess. According to FICA, aspects of the current structure are contributing to higher costs that are being passed through the broader financial system, including to insurance and advice sectors. The FY26 excess levy has been confirmed at $47.3 million, while early indications suggest an excess of at least $137.5 million in FY27.
FICA said repeated, ad hoc excess levies used to support what it describes as structural issues in the scheme design risk embedding higher costs for customers of financial services. The council argued that, without earlier reform, entities that did not engage in misconduct will continue to fund compensation through rising levies, with the associated costs ultimately borne by consumers.
The council said its member organisations plan to work with Treasury and the minister to develop options to adjust the long-term funding and design of the scheme. FICA’s membership includes the Insurance Council of Australia (ICA), the Council of Australian Life Insurers (CALI), the Financial Services Council (FSC), the Australian Banking Association (ABA), and several other banking, credit, markets, and investment industry associations.
In July, the CSLR updated its FY26 levy projections after the original estimate exceeded the $20 million cap for the personal financial advice sub-sector. The initial estimate, released in January 2025, put the total FY26 levy at $77.975 million. Following advice from the scheme’s principal actuary, the revised estimate issued in mid-2025 reduced the projected total to $75.698 million.
The largest movement is a $2.821 million reduction in the personal financial advice component and a $2.380 million increase in the securities dealing sub-sector. Because the estimated amount for personal advice still exceeds the $20 million cap, the CSLR has notified the minister of the need for a special levy of $47.289 million on that sub-sector for FY26. For securities dealing, the scheme intends to draw on cash reserves to cover the $2.4 million increase, which will be recovered through the FY27 annual levy for that sub-sector.
CSLR chief executive David Berry said the consequences of misconduct continue to extend beyond the firms directly involved. “[T]he 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. While 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. 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,” Berry said.
The pressure on scheme funding continues into the outlook period, with the CSLR’s initial levy estimate for FY27 set well above the revised FY26 total. With input from independent actuaries and in line with the legislative framework, the scheme has put the initial FY27 levy estimate at $137.5 million. The funding is expected to support the processing of 912 claims across covered sub-sectors during the year.
The initial FY27 allocation by sub-sector is:
As in FY26, the projected amount for personal financial advice exceeds the $20 million cap. A revised estimate will therefore be prepared in June 2026, after which the CSLR will be able to request a special levy for FY27 following July 1. Berry said the scheme is continuing to see elevated levels of firm failures and related claims. “The rate and scale of firm failures aren’t slowing. The number of impacted consumers continues to rise, and the proportionate negative impact caused by a relative few remains significant,” he said.
The initial FY27 estimate does not include potential impacts from the Shield and First Guardian matters. Berry said there are “too many uncertainties to reliably estimate the potential impact of Shield and First Guardian on the scheme” at this stage. Based on the information currently available, the CSLR and its actuaries expect that the revised FY27 estimate may be higher than the initial figure.
