Self-managed superannuation fund members could be forced to shoulder the cost of financial misconduct they had no role in creating, according to accounting bodies pushing back against proposed changes to the Compensation Scheme of Last Resort (CSLR).
In a joint submission to Treasury, CPA Australia, Chartered Accountants Australia and New Zealand, and the Institute of Public Accountants urged policymakers to reconsider proposals that would require SMSFs to contribute directly to funding the scheme.
The debate comes as the cost of the CSLR continues to climb. Levy costs are projected to increase from $4.8 million in 2024 to $75.7 million in 2026 and could reach $127 million by 2027, well above the scheme’s $20 million subsector cap.
The professional bodies argued that bringing SMSFs into the funding pool would place additional costs on retirement savers while doing little to address the factors driving compensation claims.
Richard Webb, superannuation lead at CPA Australia, said proposals to reduce statutory protections for some retail investors or shift costs onto SMSFs failed to tackle the root causes of losses.
“Singling out specific groups of retail investors for the loss of statutory protections won’t fix the unsustainably expensive CSLR levy. It simply shifts costs onto investors while ignoring the upstream drivers of loss – including product failures and misconduct prior to advice and distribution,” Webb said.
Concerns about the scheme have intensified as advisers continue to face growing levies linked to historical collapses and misconduct elsewhere in the financial system.
The accounting bodies said any long-term solution should ensure costs are borne by those responsible for losses rather than by investors or sectors with limited involvement.
Webb argued that managed investment schemes and product issuers should play a greater role in funding compensation where product failures contributed to consumer harm.
“For the CSLR to deliver the greatest benefit, it must truly be a scheme of last resort, and that means the upstream links in the chain must work properly. A sustainable model requires all sectors responsible for those losses – particularly managed investment schemes – to contribute fairly,” he said.
“It’s critical that costs caused by product failures are internalised by relevant product issuers, rather than being borne by unrelated sectors through special levies.
“Strong product governance must be incentivised, rather than increasing systemic risk and cross-subsidisation.”
The submission also warned that extending CSLR funding obligations to SMSFs could undermine confidence among retirement savers by requiring them to contribute towards compensation costs arising from failures elsewhere in the financial services sector.
“Making SMSFs fund the CSLR directly is poor policy, especially given that the current funding problems were caused by earlier failures. The people responsible for those losses should pay for them – not the investors who were harmed.
“The current CSLR regime already shows the unfair and disproportionate cost burden imposed on currently registered financial advisors and extending this to SMSFs simply compounds the problem.”
The accounting bodies called for a broader review of the CSLR funding model, arguing that product providers and other relevant service providers should contribute alongside advice businesses to create a more sustainable and equitable framework.
