I wrote editorials in January and then again in May to update you, the readers, about a new levy each SMSF member will likely have to pay in order to fund the Compensation Scheme of Last Resort, commonly referred to as the CSLR.
And I am revisiting this topic again as more developments have happened in the past few months and really, they’re not that good.
As you may remember, Minister for Financial Services Daniel Mulino suggested at an industry roundtable in December last year that all superannuants be required to contribute to the funding of the CSLR in the wake of the Dixon Advisory, United Global Capital, Shield and First Guardian master fund collapses. Some of this is pre-emptive as no one actually knows how big the compensation bill will be for the Shield and First Guardian situations.
As I said, the situation has progressed and it’s no longer a matter of whether this levy will be introduced, but rather when it will come into play and how much SMSF members will have to pay.
When I got wind of this proposal originally, I argued against any superannuation member having to pay the impost as I didn’t think it was fair people not caught up in these situations should have to contribute to the compensation for those individuals who were.
This point has unfortunately been lost on Canberra. However, I suppose the one thing for which we can be grateful is this levy is going to be applied across the board so it will not be something the SMSF sector will have to deal with on its own.
But we shouldn’t get too carried away with the thought industry, retail and self-managed super funds are all in this together because it is yet to be revealed how much money members of a particular category of fund will have to contribute to the CSLR.
On this front, the SMSF Association is continuing its dialogue with Treasury on the subject and is insisting there is parity for all individuals regardless of the retirement savings vehicle to which they belong.
SMSF Association chief executive Peter Burgess recently revealed he has been pushing for equal CSLR treatment for members across all super funds in the form of a flat fee and noted this should mean individuals will only have to dip into their pockets for a small amount of money. He also quantified what it might look like.
“[The SMSF levy] should [have] loose parity to what an average APRA (Australian Prudential Regulation Authority) fund member is going to pay. There are almost 17 million APRA fund members and when you spread the cost across them, then it’s a very small number,” Burgess indicated at the SMSF Association Technical Summit 2026 in Sydney.
He said the professional body is hoping the levy will come in below $100 or even $50 per SMSF.
On a slightly more positive note, the government seems to have abandoned the notion SMSF members can opt out of paying for the CSLR and, in doing so, forfeit their right to coverage by the safety net. I can’t believe this was ever even put forward as a viable course of action as limiting one particular cohort’s access to a consumer protection measure is a proposal that just should never be considered.
With regard to timing, it is unlikely this policy will be implemented in the 2027 financial year as legislation will have to be changed to facilitate the measure. But to be cynical you only need to look at how quickly the ban on limited recourse borrowing arrangements being used to buy a residential property was pushed through to know this timeframe is not set in stone.
Looking at this funding issue on a more macro level, Burgess raised a very salient point that paints some context to the question of why this should even be happening in the first place.
To this end, he acknowledged the Australian Securities and Investments Commission has secured a record $830 million in civil penalties with $644 million having been returned to clients. Simple arithmetic would suggest close to $200 million of this windfall is yet to be used.
“Why can’t some of this [money] be redirected into the Compensation Scheme of Last Resort?” he asked.
“These collapses have occurred on the watch of successive governments, on the watch of our regulators, yet they’re not contributing to the cost of this compensation. It’s been put back onto industry.”
Great point, but still here we are.
The SMSF Association will be presenting at SMSF Empowerment Day 2026. To glean more of its insights, click here to secure your seat at the event.