Mulino opens CSLR special levy consultation

Treasury has commenced a targeted consultation on the distributions of the 2026-27 special levy for the Compensation Scheme of Last Resort (CSLR).

This comes after the CSLR operator announced in July that the estimated claim costs for 2026-27 were $190.3 million. As the costs exceed the annual levy cap, the CSLR legislation provides for the imposition of a special levy to fund the excess costs so that the scheme can continue paying compensation to eligible consumers.

"The government has announced a package of reforms to strengthen the long-term sustainability of the CSLR, including a new waterfall framework to allocate special levy costs," Mulino said.

"The framework seeks to allocate levy costs to the financial services sub-sectors most closely connected to the losses giving rise to compensation claims, while limiting the risk that any single sub-sector bears a levy burden that could adversely affect its financial sustainability and viability."

Mulino said the consultation paper does not revisit the decision to adopt the waterfall framework, which Mulino announced when he unveiled sweeping reforms to the financial services industry in August.

The "rules-based special levy 'waterfall'" framework was designed to respond more predictably to large-scale, investment-related losses arising from personal financial advice misconduct where costs exceed the annual sub-sector levy caps.

This means that any funding shortfall would be allocated sequentially across up to three tiers, reflecting the relative connection of sub-sectors to the underlying losses.

The three tiers comprise the primary sub-sector or the first payer, a sub-sector whose annual levy cap has been exceeded and pays up to $20 million in special levies on top of the annual levy.

The connected sub-sector or second payer whose products and/or services are identified as being connected to the losses and pays up to $40 million per sub-sector in special levies.

The retail facing sub-sectors or final payers are the remaining sub-sectors that operate as a defined backstop if any shortfall remains and can pay up to $30 million per sub-sector in special levies.

With the waterfall system locked in, this new consultation seeks stakeholder views on the application of the framework to the 2026-27 special levy, including the operation of the first and second tiers of the waterfall and related levy allocation issues.

"As this will be the first application of the waterfall framework, stakeholder feedback will help inform both the final 2026-27 special levy determination and the future operation of the framework," Mulino said.

The consultation paper is available on the Treasury website and submissions are welcome prior to 5 October 2026.