A never ending story of levies

July was a month of bad news for financial advisers on the topic of levies.

The first was the Compesation Scheme as Last Resort (CSLR) levy. In early July, we learnt that the revised estimate for CSLR cost for the financial advice sector in 2026/27 had increased to $190.3 million, meaning that the Minister for Financial Services will need to enact a special levy of $170.3 million. This was a $63 million increase on the initial November 2025 estimate, driven by the inclusion of $30 million of claims and $8 million of AFCA costs for Shield and First Guardian and also the expectation that AFCA and the CSLR will be able to complete more of the Dixon Advisory cases than was first expected.

In fact, some four-and-a-half years after Dixon Advisory went into administration, we are probably less than a year away from seeing the end of those complaints. Unfortunately, Shield and First Guardian will take over from Dixon Advisory as a huge driver of complaints and CSLR payments. The CSLR has excluded any payments for Interprac whilst it remains operating, however that could change quickly once we get a resolution to the legal action that Interprac has taken against AFCA, which has put those cases on hold, and should anything happen on the insolvency front.

Financial Advice Profession Contribution to the Special Levy

The prospect of a special levy of $170.3 million is a very large and disturbing number, however the government has made it clear that the advice profession will not pay for all of this. Financial advisers have already paid the first $20 million as the annual levy and the recent consultation on the CSLR and the waterfall approach suggests that we would need to pay another $20 million, before the rest is picked up by other sectors. That would mean an additional approximately $1300 per adviser.

The FAAA has continuously argued that advisers should not be required to pay any further amount, as they do not have the capacity to pay anything more than the $20 million that has already been paid through the annual levy. Alternatively, if the minister were to take the same approach as he did with the 2025/26 special levy, where we picked up 22% of the cost, then we could end out paying a lot more. We feel that this is unlikely.

We believe that the worst case scenario should be limited to another $20 million of the special levy.

The government is proposing changes to the CSLR Levy, including moving away from the 'but-for' approach so consumers are only paid for capital losses, the inclusion of SMSFs in the special levy, and increased ability to pursue related parties. However, it is unlikely that any of these changes will impact the total cost in 2026/27. Currently, the reality is that the CSLR is unable to pay any claims for the 2026/27 year (other than those related to the pre 8 September 2022 legacy cases, which were paid for by the 10 largest financial institutions back in 2024), since the CSLR has to pay AFCA first, and the CSLR related costs for AFCA for 2026/27 are projected to be $21.8 million. That means that before any claims can be paid, the minister must issue a special levy, we wait for 15 parliamentary sitting days and then ASIC needs to issue the invoices. That is very unlikely to happen this calendar year, which means CSLR claimants will need to wait many months to get paid. Thus, there needs to be a sense of urgency with this.

Where the CSLR and the ASIC Funding Levy Intersect?

The other big news in July on levies was the release of the ASIC estimate for the ASIC Funding Levy for the 2025/26 year. ASIC has suggested that the cost for financial advisers will be $3037 per adviser, which is a 27% increase on the $2398 that advisers needed to pay in the 2024/25 financial year.

Indeed the figure of $3037 would be the largest amount paid since the ASIC Funding Levy first started in 2017/18. There is no doubt that it has been a wild ride, however we should keep in mind that the government came to the party in 2020/21 and 2021/22 as a result of strong advocacy at that time by the AFA and FPA, off the back of the Royal Commission induced jump in expenditure by ASIC, when they subsidised the profession and pegged the levy to the 2018/19 levy level.

So, what does the CSLR have to do with the ASIC Funding Levy?

We know that ASIC has devoted a lot of time and effort (and of course cost) to the Shield and First Guardian matters with numerous investigations, bannings, prosecutions and court proceedings. We knew that some of this activity has been directed at the advice licensees and individual advisers who are central to the Shield and First Guardian story. We know that ASIC has also been devoting a lot of time to the MISs and the super funds that have been part of the Shield and First Guardian disasters.

Therefore, whilst an increase in enforcement costs was expected, we were particularly disappointed by the lack of transparency on the increase in these enforcement costs. All we have is one very large figure of $24 million for Enforcement for financial advice, with no further detail, meaning we don't know how these Shield and First Guardian costs have been allocated across the different sectors. However as shown in the following table, it seems that when comparing the Enforcement costs in the ASIC Cost Recovery Implementation Statement across the three key sectors for the last two years, it is financial advice that not only incurs the greatest cost but has also been subject to the most substantial increase year on year. The FAAA continues to call for increased transparency around these ASIC Funding levy costs and how enforcement costs are allocated.

Since it was announced that ASIC had achieved $830 million in fines in 2025/26 as a result of successful court actions, there have been continued calls for some of this money to offset the ASIC and CSLR levies that we are paying. The FAAA has long supported this approach and continues to back this idea, however it would appear that it is landing on deaf ears.

We continue to highlight the impact of these increased levies on the small businesses that the financial advice sector is predominantly based upon. The minister will be making an announcement on the CSLR and changes in response to Shield/First Guardian on 19 August 2026. We keenly await his announcement on the actions he will take to make the CSLR sustainable and address the problems in the regulatory regime that have contributed to the Shield and First Guardian disasters. One thing is certain - changes to fix the problems are desperately needed.