Where MAs sit within Treasury’s CSLR funding proposals

Mike Taylor

Managing Editor and Publisher

9 April 2026

Treasury’s release of its consultation paper around reform options for the Compensation Scheme of Last Resort (CSLR) has detailed the exposure of managed discretionary account providers to the 2026/27 special levy.

The consultation paper includes a table in which it details that MDA providers will provide 0.47% of the ultimate $106,851,00s amount, or $501,611.

It surprised no one that financial planning licensees providing personal advice to retail clients ended up paying the largest share of the estimated cost at just under 22% of the total or $23,476,236.

The table was provided by Treasury as an illustration of how its proposed “Waterfall” model would work if the cost of the special levy was apportioned on the basis of the regulatory effort put in by the Australian Securities and Investments Commission (ASIC).

The Treasury consultation paper argues that its proposed three-tier waterfall model “will provide a consistent and repeatable mechanism for allocating funding shortfalls. It would support the sustainability of CSLR funding and improve certainty for levy payers by providing clearer expectations about how future shortfalls would be managed, while continuing to support the timely payment of compensation”.

The consultation outlines the three-tiered model as follows:

Tier 1 (primary sub-sector). The primary sub-sector reflects the CSLR’s existing funding logic that costs are initially borne by the sub-sector to which the claims relate, even where the firms paying the levy were not themselves responsible for the underlying misconduct.

Tier 2 (connected sub-sectors) . The secondary sub-sector/s recognises that, in many large-loss events, losses may be associated with one or more products and/or services that formed part of the pathway to harm, and thus the sub-sectors that provided them may be more closely connected to those losses than the broader financial sector. For example, this may include advice relating to a MIS, connected to responsible entities (REs), or advice on a product acquired through a platform, connected to operators of investor directed portfolio services (IDPSs). While a wide range of products and services may be connected to losses, only entities authorised under an AFSL to provide products and services to retail clients (i.e., financial firms required to be AFCA members) are in scope to be levied.

The parameters applying to connected sub-sectors reflect their responsibility for supporting the integrity of their own products and/or services, including any distribution channel that they may utilise. They would also create a price signal that reinforces the importance of strong governance, conduct and risk management in product design, distribution and related service delivery. More broadly, this tier would reduce the extent of general cross-subsidisation where connected sub-sectors can be identified.

Tier 3 (retail-facing backstop sub-sectors). This tier would provide a defined backstop by spreading any remaining shortfall across remaining AFSL-holding, retail-facing sub-sectors of the financial sector, excluding any sub-sectors that have reached the $40 million levying cap through being levied under an annual levy and tiers 1 and 2. The model would minimise the exposure of tier 3 entities to funding shortfalls, reflecting their weaker connection to CSLR-eligible complaints. At the same time, it would support confidence in the retail-facing system and the external dispute resolution framework by helping to ensure that eligible unpaid determinations can still be met. Together, the three tiers would create a structured and repeatable sequence for responding to large funding shortfalls, improving certainty for levy payers while recognising the practical difficulties of attributing fault across complex value chains.