Accounting sector rejects shifting CSLR costs to SMSFs

Australia's major accounting bodies have urged Treasury to reconsider proposals that would shift Compensation Scheme of Last Resort (CSLR) funding costs onto self-managed superannuation funds (SMSFs), warning the move would unfairly penalise investors while failing to address the root causes of consumer losses.

In a joint submission, CPA Australia, Chartered Accountants Australia and New Zealand and Institute of Public Accountants argued escalating CSLR costs stem from product failures, conflicted distribution models and governance shortcomings rather than investors who ultimately bear the losses.

The groups said the scheme's funding pressures have become increasingly sever, with the levy projected to rise from $4.8 million in 2024 to $75.7 million in 2026 and potentially reach $127 million by 2027.

CPA superannuation lead Richard Webb said removing statutory protections from certain categories of retail investors would not solve the underlying problem.

"Singling out specific groups of retail investors for the loss of statutory protections won't fix the unsustainably expensive CSLR levy," Webb said.

"It simply shifts costs onto investors while ignoring the upstream drivers of loss - including product failures and misconduct prior to advice and distribution," he said.

The joint submission criticised Treasury's focus on SMSF members and retail clients as potential solutions to the funding challenge, arguing managed investment schemes have been largely overlooked despite their role in generating claims.

The bodies said the CSLR's sustainability depended on addressing the causes of consumer harm rather than introducing increasingly complex funding arrangements.

Webb said a sustainable model required all sectors responsible for losses to contribute.

"A sustainable model requires all sectors responsible for those losses - particularly managed investment schemes - to contribute fairly," he said.

"It's critical that costs caused by product failures are internalised by relevant product issuers, rather than being borne by unrelated sectors through special levies," Webb said.

The accounting groups also warned against extending the funding burden to SMSFs, saying the current framework already imposes disproportionate costs on financial advisers and licensees.

Instead, they called for a broader funding model that includes product providers and other relevant service providers, alongside stronger regulation aimed at preventing future claims and ensuring the CSLR operates as genuine scheme of last resort.