The Super Members Council (SMC) is urging the Government to rethink its decision to push the bill for compensation scheme cost blowouts onto Australians with super, with data in the Mid-Year Economic and Fiscal Outlook (MYEFO) released today showing super tax receipts at forecast highs.
Super tax receipts are expected to increase by $10.9 billion over the forward estimates from 2025-26 compared to the estimates in March’s Budget, a 10% increase on the already-high levels estimated in the last update.
Despite that, the Government is asking poorer Australians, already feeling squeezed by cost-of-living pressures, to help plug a hole in the Compensation Scheme of Last Resort (CSLR) due to financial misconduct from others in high-risk products.
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.
The Government would be breaching that principle by forcing millions of everyday Australians who are members of highly regulated profit-to-member super funds to pay into the scheme.
If those in highly-regulated and well-run parts of the system foot the bill for misconduct elsewhere, it will escalate risky behaviour creating moral hazard, weaken accountability, and make some consumers pay twice.
In effect, the first pay cheque an 18-year-old worker collects next year will include a tax to pay for financial misconduct they had nothing to do with.
And while poorer low-income Australians with super would be forced to pay the levy, wealthier Australians with self-managed super funds (SMSFs) will not be levied in 2025-26, despite about 80% of existing claims on the CSLR scheme relating to advice in that sector.
That’s why the Super Members Council is urging the Government to rethink its approach and focus on reforms that strengthen consumer protections, close regulatory gaps, and prevent future harm to ensure we don’t see a repeat of the collapses of Shield and First Guardian.
This should include:
- Tougher laws to stop sales tactics that pressure people into risky investments that are unsafe or unsuitable for them.
- Stronger platform/product accountability, regulatory oversight and related party conflicts.
- Making those who cause harm pay to fix it, instead of pushing costs onto others.
“Despite a record super tax windfall, the Government is making poorer Australians pay for financial misconduct in riskier financial schemes,” says SMC Acting CEO Georgia Brumby.
“We need to see genuine reform, not just unfair levies, to ensure the scheme is sustainable."
About us:
The opinions above are those of the author in their capacity as spokesperson for Super Members Council of Australia (SMC). SMC, the authors and all other persons involved in the preparation of this information are thereby not giving legal, financial or professional advice for individual persons or organisations.