The Government should not push the bill for compensation scheme cost blowouts onto low- and middle-income Australians with super and make them pay for misconduct in unrelated high-risk financial services and products.
The Super Members Council urges the Government to rethink its proposed approach to the levy for the Compensation Scheme of Last Resort, warning it would drag low-income Australians with super into paying for growing dangers elsewhere.
This year, everyday Australians with super would be forced by Government to pay $6 million to fund compensation for dangerous high-risk schemes.
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.
The FY26 special levy is $47.3 million, but this does not yet include the fallout from the high-profile Shield and First Guardian collapses, which will lead to further cost blow outs in the scheme.
Profit-to-member super funds are tightly regulated organisations.
If those in highly regulated and well-run parts of the system foot the bill for misconduct elsewhere, it will just escalate risky behaviour, 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.
The Council welcomes consultation on reforming the CSLR and strengthening consumer protections 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.
“We strongly oppose pushing the bill onto low and middle-income Australians who have chosen the safeguards of the highly regulated super system to pay for misconduct in other high-risk financial products,” said Super Members Council CEO Misha Schubert.
“We urge the Government to stop and rethink these issues to avert a grave escalation of moral hazard.”
“The design of this scheme needs to be reviewed carefully to avoid making the current problems and perverse incentives worse.”
“It’s crucial to slam the door shut to stop consumers being harmed in the first place. Prevention is always better than clean up.”
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.
