Govt should contribute to CSLR special levy
The legislating of the ability to raise a Compensation Scheme of Last Resort (CSLR) special levy was intended to cover a single black swan event, not a flock of black swans, according to the SMSF Association.
And, on that basis, the SMSF Association believes the Commonwealth should now fund at least a part of any special levy the Assistant Treasurer and Minister for Financial Services, Daniel Mulino, chooses to impose.
The SMSF Association has made its position clear in a submission filed with the current Treasury consultation around the sub-sector cap, with SMSF Association chief executive, Peter Burgess stating the most efficient and equitable way to fund a special levy is to spread the load across all sub-sectors.
He said that while the estimated $47 million shortfall for 2025-26 is attributed to the financial advice sub-sector, AFS licensees who are AFCA members are not responsible for “this significant and concerning shortfall in potential unpaid compensation claims”.
“There is no element of the current CSLR’s industry funding model that is predicated on direct industry culpability for instances or classes of misconduct.
“In these circumstances, we believe the most effective way to quickly compensate eligible claimants is to spread the cost of the special levy across all sub-sectors.
Burgess said taken at face value it may seem inequitable for a sub-sector to fund unpaid claims for another sub-sector.
“But the reality is that the current CSLR model is not equitable – each sub-sector is mandated to fund compensation for the misconduct and deliberate negligence of their peers over which they have no control nor influence.”
He said the Federal Government should also share part of the responsibility.
“The Government is the only stakeholder that has the power to enact and affect the regulatory settings that participants must operate within. Given this, we believe the Government should also be responsible for funding part of the special levy.
“While the need for a special levy was considered in the design of the CLSR as a key funding mechanism for a ‘black swan’ event’ following a large failure, it was not designed to fund the flock of black swans that we have experienced and appear to continue to experience in recent times.”
Burgess said the Association strongly supported the CSLR’s objective of giving consumers access to financial compensation where they suffered a financial loss from poor or negligent financial advice.
“Consumers should have trust and confidence that awarded compensation claims will be paid, and in a timely manner, making it imperative that the right mechanism is chosen the meet the funding shortfall.”
Politicians & Buteaucrats Compensation Scheme. PBCS.
How about they pay levies for their costly stuff ups,
And then useless ASIC that fails the regulate MIS and lost $$$Billions, what like over $40 Billion in last 20 years.
Now CSLR is to cost how many Billion$$$$ ???
Why don’t these Politicians and Bureaucrats pay compensation levies when their industry stuffs up ????
Pay up Canberra !!!!
The government created this mess, it is up to them to fix and fund it themselves.
All licensed or auth rep advisers and all mortgage brokers or credit reps are required to have Prof Indemnity Insurance.
It is these insurance companies that should be funding the CSLR, NOT the compliant advisers and brokers!!!
Totally agree
Unfortunately, there are limitations with PI cover, including the caps on the sums insured and generally they do not cover the insureds own illegal activities. The only viable solutions to these issues is to stop them before they start, or quick and more effective action by the regulators to minimise or eliminate loss.
It is the purpose of PI insurance to protect customers from professional negligence. So, when customers are hit with investment losses caused by adviser negligence, it should be the PI insurers who compensate them.
The CLSR has just become another endless income stream for the labour government to exploit small businesses and honest hardworking Australians. It’s pure theft and stifles those wanting to grow a small advice business. It’s just another unjustified way to tax honest workers. An individual adviser already has to produce over $100,000 when you add up licence fees, insurances, registrations, memberships, and training. This ridiculous cost is just another impost the Labour Party chooses to impose on small businesses so the regulators can justify their existence. The real problem is going to be like every other tax, levy, or cost the government imposes there are no limits to the reasons it can be imposed, therefore it will continue to rise because ASIC will continually find reasons to punish various operators in the industry to justify why they exist.
Because the Labour Government currently can’t manage on the billions of dollars it already receives it will keep coming back and asking for more and more as it’s addicted to wasteful spending.
To name a few tax grab black holes of government spending just look at NDIS being scammed by organised crime, unions, bikies and whoever else feels like ripping off the government, Renewable Grants, Ongoing Welfare, Schools program, Pink bats program, and let’s not forget AUKUS (The military deal where only Albo and the Australian tax payer actually pay)
The biggest dud deal in the history of the Australian government, and the biggest waste of taxpayer dollars the world has ever seen.
Now because they have run out of things to sell off they dip back into the trusty old middle class, the average worker, the small businesses owner for another pound of flesh. Why? Because it’s easy, the workers are the low hanging fruit they can pick daily without any resistance. Easy money!!!!