Industry funds baulk at Mulino’s CSLR special levy

Mike Taylor

Managing Editor and Publisher

25 November 2025

ANALYSIS

Industry funds are sending the Albanese Government a clear message that they do not want to be part of bail-out packages for the Compensation Scheme of Last Resort (CSLR).

They are OK with retail funds sitting on investment platforms being a part of the bail-out being considered by the Assistant Treasurer and Minister for Financial Services, Daniel Mulino, but they believe “profit to member” funds should not be handed a bill for the misdeeds of others.

The industry funds, represented by the Super Members Council (SMC) have a point, but the reality for Mulino is that he has limited options with respect to funding the special levy necessary to bail-out the CSLR notwithstanding their claims the Government will be shifting cost on to “12 million low-and-middle income Australians”.

Mulino’s options are constrained by the reality that the CSLR is funded by:

• licensees who provide personal financial advice to retail clients on relevant financial products

• credit intermediaries

• engaging in credit activity (within the meaning of the NCCP Act 2009) other than as a credit provider

• securities dealers

Importantly in terms of sheeting home the blame an cost to where it properly belong is that, nowhere on that list sits Managed Investment Schemes (MISs).

In a statement issued yesterday, the SMC said: “The CSLR was created to compensate victims of financial misconduct as a last resort after all other options to recover money had been exhausted. A key design principle was that the parts of the financial services system from which the consumer harms had arisen would bear that 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,” it said.

The SMC has also argued that “spreading excess costs across unrelated sub‑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.

In this, it is aligned with the Financial Services Council (FSC) which has similarly bemoaned superannuation funds being required to shoulder some of the burden but has suggested that, recognising Mulino’s dilemma, the super sector would be prepared to contribute to a once-off special levy.

The SMC is also in alignment with the core arguments of the Financial Advice Association of Australia (FAAA) with respect to a root and branch redesign of the CSLR funding mechanism to ensure that the scheme is a genuine “last resort”.

The SMC’s statement said it is “calling on Government to strengthen the fairness and integrity of the CSLR scheme by:

• Ruling out cross‑subsidisation of CSLR excess costs by APRA‑regulated superannuation trustees.
• Re‑establishing CSLR as a true scheme of last resort by: ­
  • Removing retrospective elements and setting clear guardrails for any special levy. ­
  • Pursuing targeted Government funding for legacy cases where necessary to reset the scheme.
  • Driving regulatory fixes (anti‑hawking, platform oversight, conflict management, subrogation/recovery).
• Consider alternative, fairer funding sources as a short-term stopgap measure while reforms take effect – such as drawing on unclaimed money held by the ATO that has not been claimed after exhaustive efforts.

“SMC reiterates its calls for stronger consumer protections to ensure the bill for CSLR compensation does not continue to mount, including:

• Tightening and enforcing anti‑hawking prohibitions to stop sales tactics that pressure people into risky investments that are unsafe or unsuitable for them.
• Strengthening platform/product regulatory oversight and related‑party conflicts.
• Making those entities pay to fix the problems, instead of passing costs onto others.