Brokers’ CSLR levy rises amid massive industry-wide jump

The Compensation Scheme of Last Resort (CSLR) today (17 November) released its initial levy estimate for FY27, revealing that the credit intermediation subsector (mortgage and finance brokers) has an initial levy estimate of $2.2 million for the upcoming financial year.

This represents a modest increase from the revised estimate of $1.8 million for the 2025–26 period. The low-claims figure means the subsector’s contribution remains small relative to the total required levy, which has soared given ongoing issues in personal advice.

Indeed, the overall levy needed for FY27 has seen a massive jump, set to be the largest to date at a total of $137.5 million to cover an expected 912 claims. This marks a substantial increase from the revised $75.7 million figure for the prior financial year.

The estimate is overwhelmingly dominated by the personal financial advice subsector, which will need to pay $126.9 million, vastly exceeding the legislative $20 million subsector cap.

This breach of the cap immediately triggers a legislative process that will require the CSLR to complete a revised estimate in June 2026.

Concerningly, the current $137.5 million estimate does not include the potential impact of high-profile collapses such as Shield and First Guardian.

CSLR CEO David Berry said that, due to “too many uncertainties”, the impact of these collapses could not be reliably estimated at this stage. However, based on limited information, the CSLR anticipates the revised levy estimate in June 2026 may be even higher than the $137.5 million estimate published today.

“The rate and scale of firm failures aren’t slowing. The number of impacted consumers continues to rise, and the proportionate negative impact caused by a relative few remains significant,” Berry said.

Full breakdown of the FY27 initial levy estimate:

Subsector	FY27 initial levy estimate
== == Personal financial advice	$126.9m
Securities dealing	$6.5m
Credit intermediation	$2.2m
Credit provision	$2.0m

Given the huge rise in compensation costs associated with financial advice, Assistant Treasurer and Minister for Financial Services Daniel Mulino had asked the Treasury to consult on ways to address the shortfall.

There were three options being considered:

1. Spreading compensation over time.
2. A special levy raised just for the financial advice subsector.
3. A special levy for several subsectors or more.

Earlier this year, the broker associations, including the FBAA and MFAA, warned the government that brokers should not be forced to cover a $47.3 million shortfall in compensation claims arising from financial misconduct in the advice sector.

They said that imposing extra fees on brokers would be unfair, disproportionate, and inconsistent with the scheme’s purpose, calling instead for government responsibility and a more equitable solution.

Reacting to the new CSLR estimates, the Mortgage and Finance Association of Australia (MFAA) has emphasised that the scheme should not be funded through cross-subsidisation between subsectors.

MFAA CEO Anja Pannek said: “The MFAA continues to support the CSLR in principle and recognises its important role in providing consumer compensation. However, the scale of the FY27 estimates highlights the need for urgent action, to ensure the scheme is sustainable and that the underlying causes of misconduct are addressed.

“With an initial estimate of $137.5 million, we have seen an almost doubling of the total funding required for the scheme,” the MFAA CEO said and noted that this is largely due to high levy costs in personal financial advice and highlighted that this does not include amounts for unresolved Shield and First Guardian matters.

According to Pannek, these yet-to-be-determined amounts are “likely to cost hundreds of millions of dollars, representing significant forward-looking uncertainty for the scheme”.

The MFAA CEO continued: “The scheme in its current form is not sustainable. With what we are seeing in the personal financial advice sub-sector, the FY2027 estimates highlight special levies, which were originally anticipated for ‘black swan’ type events, may be required for years to come.

“With FY26 special levies still unresolved and the outcomes of the CSLR post-implementation review still unknown, we are calling for clarity for all industries contributing to the scheme.

“We must avoid a situation where the financial services sector is trapped in a ‘groundhog day’ of repeated compensation events, permanent special levies and ongoing uncertainty. Allowing cross-subsidisation between sub-sectors creates a significant moral hazard.

“It means that industries such as mortgage broking will be penalised for failures occurring in other parts of the system. The priority must be addressing the root causes of misconduct and preventing future consumer harm.”

The MFAA CEO said regulators should focus their efforts on subsectors where misconduct is rising and not impose additional costs or regulatory burden on sectors, such as broking, where misconduct remains low.

Similarly, Finance Brokers Association of Australia managing director Peter White AM noted that the vast majority of the levy relates to the personal advice sector, as opposed to mortgage brokers, adding: “In fact, the broker levy of $2.2 million represents just 1.6 per cent of its $137.5 million total.

“While this is an increase on the previous financial year, it shows that on the whole brokers are doing the right thing, but of course we do want to see this figure trending down.

“There’s still more hard work ahead to improve these outcomes as we strive to reduce the cost of this levy to brokers."

White continued: “We’ve always said brokers shouldn’t be forced to bear the brunt of shortcomings that are primarily taking place in other sectors.”

[Related: Broker associations outraged over ‘unfair’ CSLR levies]