The Compensation Scheme of Last Resort (CSLR) was set up by the federal government in April 2024 to provide compensation where an AFCA determination remains unpaid by a financial firm.
The CSLR is funded by annual industry levies and it is legislated to provide up to $150,000 in compensation to consumers.
Compensation is available to eligible claimants for matters involving the following financial services sub-sectors:
There are two caps related to how the CSLR is funded:
o $250 million cap on total annual levy collection
o $20 million cap per sub-sector (e.g. financial advice, credit intermediaries)
Treasury has released a consultation paper outlining options to address a $47.3 million shortfall in the CSLR’s funding for the 2025-26 financial year. It has called for submissions until 29 August 2025.
The shortfall arises because the amount attributed to the financial advice sub-sector exceeds its annual funding cap.
⚠️ 2025-26 CSLR funding shortfall
• The financial advice sub-sector exceeded its $20 million cap:
o Estimated claims and costs: $67.3 million
o Levy allowed under cap: $20 million
o Shortfall: $47.3 million
This triggers the Minister for Financial Services’ powers under the Corporations Act to determine how to fund the excess.
🧾 What options is Treasury consulting on?
The Minister can use one or more of the following options:
1. Take no action. This means:
• No additional levy this year.
• Unpaid claims rolled into future years’ estimates.
2. Spread compensation over time. This results in:
• Delays in claimant compensation with claimants being paid in instalments across multiple years.
• Reduced levy burden in 2025-26
3. Apply a special levy on financial advice sub-sector only (i.e. the full $47.3 million would be recovered solely from that sub-sector).
4. Spread a special levy across multiple sub-sectors. Treasury presents five possible ways to do this.
💡 Estimated cost for credit intermediaries (brokers)
If a special levy is spread across multiple sub-sectors, Treasury estimates the cost to the credit intermediaries sub-sector under different methods:
| Method of spreading the levy | Estimated cost per credit representative |
| Equally across all retail-facing sub-sectors | $41.42 |
| Based on number of entities (population) | $263.57 |
| Based on revenue | $63.57 |
| Based on profit | $62.11 |
| Based on ASIC regulatory effort | $7.34 |
These figures are illustrative estimates and may not reflect actual levies imposed if any option is adopted.
The MFAA is in the process of preparing its submission for Treasury’s consultation.
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