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Financial Planning

CSLR review will scrutinise effect on businesses

The Compensation Scheme of Last Resort's (CSLR) funding model and how this impacts the businesses that support its operation will be centrepieces in Treasury's review.

Treasury will also investigate how the CSLR is delivering on its intended objectives and how its operator interacts with the delivery of the scheme, according to the terms of reference document.

It will consider the current scope of the CSLR and any related matters, as well as any other current and recent reviews and inquiries that may be relevant.

Outgoing minister for financial services Stephen Jones last Friday announced the government will launch a review of the scheme.

The CSLR was introduced to provide victims of financial services misconduct with access to redress and compensation within the scope of the scheme, after all other avenues have been exhausted. Compensation is capped at $150,000.

"The government is directing the Treasury to undertake a post-implementation review (review) of the scheme to ensure the scheme is delivering its intended objectives. This will give stakeholders confidence in the scheme and support the outcomes of consumers," Jones said.

Stakeholders wishing to make a submission to the review have until February 28.

The 2026 financial year CSLR levy estimates have blown out to $77.9 million. The financial advice sector is set to pay $70.11 million - which has blown out of proportion with the sector cap of $20 million.

This is largely due to the failures of Dixon Advisory & Superannuation Services (DASS) and United Global Capital (UGC), whereby 92% of the total claims expected to be paid relate to these two firms.

While there is currently no certainty as to who will fund the balance of $50 million, the relevant minister at the time will make a determination.

If financial advisers end up footing the bill, CPA Australia's spokesperson on financial advice Richard Webb said financial advisers could see their levies potentially jump from $1186 to $4516 - an increase of more than 250% in  12 months.

Financial Advice Association Australia chief executive Sarah Abood said: "I am calling on minister Jones and Treasurer Chalmers to immediately declare their intentions for what will happen to the $50 million of costs that are above the sector cap. It must not be the blameless small business financial advice profession that pays this huge bill, when the people who caused this problem are walking away virtually unscathed."

Read more: CSLRTreasuryCompensation Scheme of Last ResortCPA AustraliaDixon AdvisoryFinancial Advice Association AustraliaRichard WebbSarah AboodStephen JonesUnited Global Capital