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The Finance Brokers Association of Australia (FBAA) and the Mortgage and Finance Association of Australia (MFAA) have weighed in on the CSLR debacle.
Each is protesting a government plan that would force brokers to pay extra fees to cover the costs of financial misconduct committed by financial advisers.
The CSLR is a government-backed safety net. Its purpose is to pay compensation to consumers who have been wronged by a financial firm, but who cannot get paid because that firm has gone out of business.
Victims who have an unpaid determination can be paid compensation of up to $150,000 from the Australian Financial Complaints Authority (AFCA).
The scheme has been active since April 2024, with the government installing a $20 million levy limit for the advice sector.
The cost of the 2025–26 CSLR is estimated to reach $67.3 million, a shortfall of $47.3 million.
FBAA and MFAA are outraged that this shortfall could fall under the responsibility of brokers, which is a largely compliant industry.
In a submission to the Treasury, the FBAA labelled the tax unfair and urged the government to reconsider, as innocent business owners may be imposed with financial penalties for the failings of a completely different sector.
“When the CSLR was first proposed, the FBAA warned it wasn’t appropriate to take funds from unrelated sectors to cross-subsidise failings in another sector,” said FBAA managing director Peter White.
“The forecast increase in payments relates to failings in the financial advice sector, not the broking sector, and I don’t want to see our industry unfairly penalised.”
FBAA regulatory compliance specialist David Carson said the government shouldn’t treat the broking industry as a “bottomless supply of money”.
He said the government should contribute to the shortfall and believes the broking industry is already taxed and levied far too much.
“We recognise there are consumers who are affected by the actions of bad actors, and we support measures designed to assist them… However, this scheme is barely 12 months old and we already have a problem. We don’t want to see honest, hardworking businesses deprived of vital income, especially when the failures in this scheme substantially lie at the feet of government and regulators,” said Carson.
MFAA CEO Anja Pannek shared a similar view and said the CSLR must remain sustainable and equitable.
She noted that brokers already contribute through ASIC levies and AFCA fees: “Extending special levies to brokers would be unfair, disproportionate, and inconsistent with the purpose of the CSLR.
“To ask these small businesses to subsidise unrelated parts of the financial sector through a special levy is inequitable. It would not only create unnecessary financial burdens but also risk undermining the compliance frameworks and consumer protections that aggregators and brokers invest in every day.”
Assistant Treasurer and Minister for Financial Services Daniel Mulino has asked the Treasury to consult on ways to address the shortfall.
There are currently three options being considered:
- Spreading compensation over time.
- A special levy raised just for the financial advice subsector.
- A special levy for several subsectors or more.
