Industry bodies have cautioned the CSLR levy shift risks undermining trust by forcing super members to cover compensation for unrelated misconduct.
Superannuation peak groups have urged the government to rethink plans to include APRA-regulated funds in the Compensation Scheme of Last Resort (CSLR) levy, warning the move risks undermining trust in Australia’s compulsory retirement savings system.
Earlier this week, it was announced superannuation trustees will be included in payments for the CSLR levy, paying an estimated 12.9 per cent of the $47.3 million special levy.
ASFA chief executive Mary Delahunty said the proposal would “set a dangerous precedent” by requiring super members to fund compensation for losses arising in other parts of the financial sector.
She said it “risks treating retirement savings as a convenient pot of money for solving problems, rather than keeping super focused on providing a dignified post-working life for Australia’s retirees.”
Delahunty argued that trust in a mandatory system relied on government adhering to super’s legislated objective.
“If the government sets the precedent of using people’s retirement savings for other reasons, that will undermine trust in the system,” she said.
She added it was “wrong in principle” for super members to fund the CSLR because they cannot benefit from the scheme.
“Super has its own compensation mechanism, already paid for by super fund members under Part 23 of the Superannuation Industry (Supervision) Act,” she said.
Delahunty said rising demands on the CSLR pointed to a deeper problem.
“If super fund members are being called on to fund something they can never use, simply because the costs have become unmanageable, then the CSLR needs fixing, and fast.”
She likened the approach to “being forced to pay for home insurance not only for your own house, but also for someone else’s house in another town.”
ASFA said the growing scope and costs of the scheme had increased the temptation to shift the funding burden onto well-regulated sectors that already had compensation arrangements and no history of leaving losses uncompensated. It said the CSLR urgently needed an overhaul to become “sustainable and fair.”
“Making the CSLR sustainable requires more than filling its funding gaps,” Delahunty said. “Put simply, we think prevention is better than compensation.”
The Super Members Council (SMC) has also pushed back, saying the government should not hand the bill to “12 million low- and middle-income Australians.” It said the CSLR was designed so that the parts of the financial system where the consumer harm arose would bear the cost.
“It would be a clear breach of that principle to force millions of everyday Australians who are members of highly regulated profit-to-member super funds to pay into this scheme,” the Council said.
The FY26 special levy stands at $47.3 million and is forecast to reach $107 million in FY27, far above the $20 million sub-sector cap. These estimates do not include potential fallout from the Shield and First Guardian collapses, which the Council warned could overwhelm the scheme.
It said profit-to-member funds were tightly regulated, required to hold reserves, and already operated within strict accountability structures.
“The answer to the Shield and First Guardian collapses is not to send the bill for those risks to millions of everyday Australians in the mainstream super system,” it said.
The Council warned that spreading excess CSLR costs across unrelated sectors would embed and escalate moral hazard.
“If highly regulated parts of the system foot the bill for misconduct elsewhere, it is likely to escalate risky behaviour, weaken accountability, and make some consumers pay twice,” it said.
It called for government action to strengthen fairness and integrity in the scheme, including ruling out cross-subsidisation by APRA-regulated trustees, re-establishing CSLR as a true last-resort mechanism, pursuing targeted government funding for legacy cases, and tightening regulatory settings such as anti-hawking, platform oversight, conflict management and recovery arrangements.
The Council also encouraged exploring short-term alternative funding sources, including unclaimed money held by the ATO “that has not been claimed after exhaustive efforts.”
Super Members Council CEO Misha Schubert said stronger consumer protections were needed to prevent the bill continuing to grow.
“It’s crucial to close the door to stop consumer harms like these in the first place. Prevention is always better than clean up,” she said.
“It’s just not fair to ask 12 million low- and middle-income Australians in the highly regulated super system to pay for compensation for other parts of the financial services system.”
