Treasury consultation canvasses axing AFCA ‘but for’

Mike Taylor

Managing Editor and Publisher

8 April 2026

The Federal Treasury has acknowledged concerns about the Australian Financial Complaints Authority’s (AFCA’s) so-called ‘but for’ approach to assessing compensation and is canvassing dropping it in favour of a capital losses only.

The proposal is being canvassed in consultation documents released by Treasury overnight looking at the future of the Compensation Scheme of Last Resort (CSLR) which also canvasses giving the scheme the power to claim back losses on behalf of affected clients.

The consultation paper has canvassed limiting CSLR-eligible compensation to capital losses only, noting that capital loss would be assessed at the portfolio level across all investments that were subject to the relevant advice.

It said no counterfactual component would apply in calculating the loss.

“Compensation would be calculated as the difference between the amount originally invested and the consumer’s actual financial position following the breach, after factoring any withdrawals or contributions made over the life of the investment. This would mean compensation is limited to consumers who have experienced a net capital loss when assessed across the portfolio that was subject to the relevant advice.”

The consultation paper also canvasses prescribing the use of a counterfactual benchmark, noting that under this option, CSLR compensation would continue to include a counterfactual component, but the rate of return used when calculating the counterfactual position would be limited to a prescribed benchmark.

“Compensation would be the difference between the counterfactual portfolio position calculated using that benchmark and the consumer’s actual portfolio position following the breach, subject to the $150,000 cap,” it said.