Don't hand CSLR bill to 12 million low- and middle-income Australians

Super Members Council

The Super Members Council says the Government should not hand the bill for the Compensation Scheme of Last Resort to 12 million low- and middle-income Australians.

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.

It would be a clear breach of that principle to force millions of everyday Australians who are members of highly regulated profit-to-member super funds to pay into this scheme.

The FY26 special levy is $47.3 million, and the FY27 estimate is already $107 million, well above the $20 million sub-sector cap. These forecasts do not yet include the fallout from the high-profile Shield and First Guardian collapses, which could overwhelm the scheme.

Profit-to-member super funds are tightly regulated. They must keep money aside for emergencies and follow strict rules to protect their members. The answer to the Shield and First Guardian collapses is not to send the bill for those risks to millions of everyday Australians in the mainstream super system.

Spreading excess costs across unrelated sub‑sectors would embed and escalate moral hazard. If highly regulated parts of the system foot the bill for misconduct elsewhere, it is likely to escalate risky behaviour, weaken accountability, and make some consumers pay twice.

The Council is calling on Government to strengthen the fairness and integrity of the CSLR scheme by:

• Ruling out cross‑subsidisation of CSLR excess costs by APRA‑regulated superannuation trustees.
• Re‑establishing CSLR as a true scheme of last resort by: ­
  • Removing retrospective elements and setting clear guardrails for any special levy. ­
  • Pursuing targeted Government funding for legacy cases where necessary to reset the scheme.
  • Driving regulatory fixes (anti‑hawking, platform oversight, conflict management, subrogation/recovery).
• Consider alternative, fairer funding sources as a short-term stopgap measure while reforms take effect – such as drawing on unclaimed money held by the ATO that has not been claimed after exhaustive efforts.

SMC reiterates its calls for stronger consumer protections to ensure the bill for CSLR compensation does not continue to mount, including:

• Tightening and enforcing anti‑hawking prohibitions to stop sales tactics that pressure people into risky investments that are unsafe or unsuitable for them.
• Strengthening platform/product regulatory oversight and related‑party conflicts.
• Making those entities pay to fix the problems, instead of passing costs onto others.

“It’s crucial to close the door to stop consumer harms like these in the first place. Prevention is always better than clean up,” said Super Members Council CEO Misha Schubert.

“It’s just not fair to ask 12 million low- and middle-income Australians in the highly regulated super system to pay for compensation for other parts of the financial services system.”