Call to cut ASIC and AFCA admin costs from CSLR levy

Limitations should be placed on the amounts which can be extracted from the Compensation Scheme of Last Resort (CSLR) levy to cover the administrative costs of the CSLR, the Australian Financial Complaints Authority (AFCA) and the Australian Securities and Investments Commission (ASIC).

A Senate Committee inquiring into the CSLR and the collapse of Wealth Management firms has been told that the fees and costs being extracted by the CSLR, AFCA and ASIC are estimated at around 42% of the total of CSLR liabilities in the second levy period.

The claim has been made by The Principals Community representing small licensees which has told the Senate Economics References Committee inquiry that the levy imposed on the financial service industry also includes AFCA’s unpaid fees and AFCA’s accumulated unpaid fees, the CSLR operator’s administrative costs, ASIC’s administrative costs and cost to establish and maintain a capital reserve.

“The March 2024 Actuarial Report has estimated that the unpaid AFCA fees in relation to the 116 finalised complaints would amount to $1,447,000, with a further $4,717,000 in CSLR costs and $361,000 in ASIC costs for the financial advice sector as a whole for the 2nd levy period,” the TPC submission said.

“Based on these figures, AFCA, CSLR and ASIC fees would be approximately $4,500 for each finalised Dixon Advisory claim during the second levy period. 18 The costs recovered in respect of each and every claim is yet another burden to be added to the CSLR funding burden for the financial advice sub sector.”

“Moreover, AFCA, ASIC and CSLR fees and costs amount to what is estimated at around 42% of the total of CSLR liabilities for the 2nd levy period.”

“Accordingly, limitations should be placed on the administrative costs incurred by the CSLR and the level of fees incurred by AFCA and ASIC in relation to the CSLR. These additional costs should also be independently reviewed at regular intervals in order to ensure that the scheme continues to operate a “cost effective, efficient and economical service,” the submission said.

Elsewhere in its submission, the TPC argues that the nature of the legislation underpinning the CSLR levy may, in fact, be beyond the constitutional powers of the Commonwealth to impose taxes.

“In order to address the arbitrary nature of the CSLR levies payable by the financial advice sub-sector, the Commonwealth should assume responsibility for funding any liabilities (including costs) resulting from the payment of compensation by CSLR to former clients of Dixon Advisory over and above the amounts paid or committed by Australia’s 10 largest banking and insurance groups,” it said.