Treasury and Govt knew of CSLR funding flaws

Mike Taylor

Managing Editor and Publisher

10 February 2025

ANALYSIS

Some of the earliest submissions to Treasury’s post-implementation review of the Compensation Scheme of Last Resort have already been filed but don’t hold your breath waiting for Treasury to make those submissions public.

If financial planners file submissions to the post-implementation review and want them made public, then they had best publish them themselves. This history Treasury reviews is that submissions only become visible to the public many months after they have been filed.

But, in any case, the terms of reference of the post-implementation review reflect the haste with which it was conceived – just four dot points.

The Treasury web site states as follows:

Scope of the review

The review will improve understanding of the scheme’s operation and the outcomes it is delivering.

The review will consider:

• How the CSLR is delivering on its intended objectives;
• How the CSLR funding model is formulated, including its potential impacts on businesses who fund the industry levy;
• How the powers of the CSLR Operator interact with delivery of the scheme; and
• The current scope of the CSLR and any related matters.

The review should have regard of other current and recent reviews and inquiries as relevant.

At dot point 2, financial advisers could be forgiven for believing that Treasury should have considered the impacts on the businesses who fund the levy well before the underlying legislation was implemented.

Of course, advisers now know that the levy necessary to fund the CSLR is estimated at $50 million above the $20 million sector cap and that by simply ordering Treasury to undertake the post-implementation review, the Government has effectively kicked the can down the road until after the upcoming Federal Election.

What is damning about the Government’s approach to the CSLR and its costs is that it was given early warning of the escalating costs of the scheme driven by the complaints around the collapse of Dixon Advisory with documents released under Freedom of Information confirming Assistant Treasurer and Minister for Financial Services, Stephen Jones, receiving a highly detailed heads-up from Treasury in mid-2022.

The Treasury submission to Jones recommended: “That you note the recent collapse of Dixon Advisory exposes the CSLR to higher costs than initially estimated”.

Sadly, even knowing about the Dixon-driven cost blow-out, Treasury did not recommend Jones “make any changes to the current design of the CSLR”.

“The scheme is appropriately calibrated to effectively respond to the collapse of Dixon Advisory, and support the ongoing financial sustainability of the scheme in the longer-term,” it said.

In short, Treasury’s post-implementation review will not tell the department anything it does not already know and the political outcome will reside in the hands of whichever party holds the Treasury benches after the Federal poll.