I’m not sure if you’ve heard of the Compensation Scheme of Last Resort (CSLR). It is a government mechanism to ensure investors who have lost money from product failures receive some money to cover their unfortunate loss.
It mainly came about as a result of the Dixon Advisory and Superannuation Services situation where investors were advised to place their money into US property offerings that turned sour. The CSLR was also meant to address the United Global Capital situation that saw individuals enticed to switch from a public offer super fund to an SMSF and then subsequently invest in a product that eventually met its demise.
These were seen as black swan events but nonetheless saw funding for the CSLR requiring a dramatic increase. In the main this levy has been unfairly imposed upon financial advisers and not product providers who have been front and centre of all these unfortunate episodes.
To give you some perspective of what this initiative is costing the levy on the financial advice sector for the 2025/26 financial year was calculated to be $47.3 million.
However there are now two additional black swan events (you may well ask how may black swans can there be) in the shape of the First Guardian and Shield master fund collapses that will now need CSLR intervention but the impact of which has not been included in any of the program’s funding estimates.
As a result the government has come to the realisation financial advisers cannot be expected to fund this scheme alone. So what’s the next step in the evolution? That’s right – hitting up super funds.
This development happened just before Christmas when Assistant Treasurer and Minister for Financial Services Daniel Mulino held a round table involving both industry and retail super funds.
Here he suggested both types of super funds would also have to cover off some of the levy. This led to very strong pushback from several industry bodies, such as the Association of Superannuation Funds of Australia and the Super Members Council (SMC).
Naturally one of the objections raised was ‘if we are going to be hit, then why should SMSFs not face the same predicament’. In an Australian Financial Review article, SMC chief executive Misha Schubert was quoted as saying it “defies logic the government would be asking low-income Australians to pick up the tab, while high net wealth SMSF holders don’t have to lift a finger”.
Congratulations Minister, I think we can safely say you’ve reignited the superannuation sector war, and Mulino himself has admitted it is something he is going to have to consider.
As far as the idea goes, it seems ridiculous for SMSF trustees who had nothing whatsoever to do with collapsed investment schemes to be asked to fund the compensation for unfortunate individuals who lost money as a result of partaking in those offerings.
I’m actually going to mount a case against any super fund having pay a portion of the CLSR levy. Quite frankly, why should any super fund be dragged into funding the program at all? What’s it got to do with them? Making super funds pay for a portion of the CSLR levy will only penalise members and will introduce an element that erodes their retirement savings, particularly when the majority probably steered clear of these products.
I could understand punitive action taken against certain funds if it was found their trustees had a deep involvement in channelling monies into the collapsed investment schemes, but this is not the case and we know why this is happening. The government’s gaze just can’t be averted from the $4.3 trillion held in superannuation and the potential problems it could be used to fix.
But this is ridiculous and it basically means superannuants will be hit twice – once via their taxes because the government will have to fund some of the CSLR levy and one more time as an individual fund member. How is that fair?
It’s time for Canberra to step up and wear the big-boy pants here on two fronts. Firstly it has to come to the realisation the CSLR should be government funded and, secondly, it is time for the regulators to exact compensation from those responsible for this situation and they are the product providers.
Until then there can be no prevention and we all know prevention is better than cure, especially this one.
I’d also like to announce smstrusteenews will be published on a weekly basis in 2026.