# CSLR SMSF Levy: The $154M Compensation Problem Facing Australian Trustees Canonical URL: https://superinformed.com.au/newsletter/cslr-smsf-levy-compensation-scheme Markdown URL: https://superinformed.com.au/llms-pages/newsletter/cslr-smsf-levy-compensation-scheme.md Section: Newsletter Published: 2026-05-28 Last modified: 2026-05-28 Summary: SMSF complainants account for 93.1% of all CSLR paid and pending claims - $154M. Treasury is consulting on whether SMSF trustees should fund the scheme. Here's what the opt-in and opt-out models mean for your fund. Editorial note: Super Informed content is general information for Australian SMSF trustees. It is not personal financial advice, tax advice, or legal advice. Author/editor: Sam Corrie, Editor, Super Informed, Adelaide SA Editorial method: Primary-source review of ATO, ASIC, Treasury, legislation, regulator announcements, explanatory material, and official guidance where available. Independence: Super Informed is an independent editorial project. It is not affiliated with, endorsed by, or written on behalf of any employer, bank, super fund, product issuer, adviser, accountant, or regulator. Corrections: Corrections and clarifications can be sent to sam@superinformed.com.au. Material corrections are reflected in the article and updated date where appropriate. Scope: General information only. Not personal financial advice, tax advice, or legal advice. ## Key Takeaways - The Compensation Scheme of Last Resort pays eligible compensation when a financial firm cannot pay an AFCA determination. For financial advice matters, compensation is capped at $150,000 per claim. - As at 28 February 2026, Treasury said cases involving SMSF complainants accounted for around 93.1% of all paid and pending CSLR cases, representing about $154.14 million in compensation. - SMSF members can already receive CSLR compensation, but SMSFs as a sector do not currently fund the scheme. - Treasury's April 2026 consultation paper included two possible SMSF funding models: opt-in and opt-out. Neither has been legislated. - The FY2026-27 initial CSLR levy estimate is $137.5 million, including $126.9 million for the personal financial advice sub-sector. That estimate does not include Shield and First Guardian. - The next key milestone is expected after 1 July 2026, when the CSLR can request a FY2026-27 special levy from the Minister. ## Article Content The Compensation Scheme of Last Resort has become one of the most expensive financial advice clean-ups in Australia. The short version: the CSLR pays eligible compensation when a financial firm cannot pay an AFCA determination, usually because it has collapsed. The problem is that the scheme is now facing costs far beyond what the original levy settings were built to absorb. SMSF complainants sit at the centre of that pressure. Treasury's April 2026 consultation paper said that, as at 28 February 2026, cases involving SMSF complainants accounted for around 93.1% of all paid and pending CSLR cases, representing approximately $154.14 million in compensation. SMSF members can already receive CSLR compensation. SMSFs as a sector do not currently fund the scheme. Treasury is now asking whether that should change. --- ## Key Takeaways - The Compensation Scheme of Last Resort (CSLR) pays eligible compensation when a financial firm cannot pay an AFCA determination. For financial advice matters, compensation is capped at $150,000 per claim. - As at 28 February 2026, Treasury said cases involving SMSF complainants accounted for around 93.1% of all paid and pending CSLR cases, representing about $154.14 million in compensation. - SMSF members can already receive CSLR compensation, but SMSFs as a sector do not currently fund the scheme. - Treasury released a consultation paper in April 2026 with two possible SMSF involvement models: opt-in and opt-out. Neither has been legislated. - The FY2026-27 initial CSLR levy estimate is $137.5 million, including $126.9 million for the personal financial advice sub-sector alone. This estimate does not include the impact of Shield and First Guardian. - The SMSF Association opposes bringing SMSFs into the levy base, arguing the losses were caused by advice failures and product failures rather than the SMSF structure. - The next key milestone is expected after 1 July 2026, when the CSLR can request its FY2026-27 special levy from the Minister. --- ## Contents - [What is the CSLR?](#what-is-the-cslr) - [Why the CSLR is under financial pressure](#why-the-cslr-is-under-financial-pressure) - [How much has the CSLR cost so far?](#how-much-has-the-cslr-cost-so-far) - [Could SMSF trustees be required to pay a CSLR levy?](#could-smsf-trustees-be-required-to-pay-a-cslr-levy) - [Opt-in vs opt-out: what each model would mean](#opt-in-vs-opt-out-what-each-model-would-mean) - [What the SMSF Association says](#what-the-smsf-association-says) - [What SMSF trustees should consider now](#what-smsf-trustees-should-consider-now) - [What to watch after 1 July 2026](#what-to-watch-after-1-july-2026) - [How to check your financial adviser's credentials](#how-to-check-your-financial-advisers-credentials) - [Frequently Asked Questions](#frequently-asked-questions) --- ## What is the CSLR? The [Compensation Scheme of Last Resort](https://cslr.org.au/what-is-cslr/) is a legislated, industry-funded safety net for eligible consumers who have an unpaid compensation determination from AFCA. It was established after the Hayne Royal Commission and the Ramsay Review. The scheme commenced operations on 2 April 2024 and can pay up to $150,000 in compensation for eligible claims. In a financial advice case, the pathway generally looks like this: 1. A consumer receives personal financial advice and suffers a loss. 2. The consumer obtains an AFCA determination requiring the adviser or licensee to pay compensation. 3. The responsible firm does not pay, typically because it is insolvent. 4. The CSLR steps in to cover the shortfall, subject to the eligibility rules and compensation cap. The [Australian Financial Complaints Authority](https://www.afca.org.au/cslr) is Australia's external dispute resolution body for financial services complaints. AFCA handles the complaint first. The CSLR only becomes relevant when an eligible AFCA determination remains unpaid. The scheme is [funded by levies](https://cslr.org.au/how-were-funded/) on parts of the financial services industry. ASIC determines and collects those levies. Since the scheme began, the personal financial advice sub-sector has carried the largest share of the cost. That is where the funding tension starts. ## Why the CSLR is under financial pressure Two separate events explain the current funding problem. One is already driving claims. The other is still working through the system. ### The current driver: Dixon Advisory Dixon Advisory collapsed in January 2022 after many clients, including SMSF trustees, were directed into investments connected to US commercial real estate. The firm entered liquidation and could not pay the AFCA determinations that followed. Treasury's CSLR consultation paper says most of the current SMSF-linked compensation cost relates to the financial advice sub-sector and Dixon Advisory. This is why the policy debate is so uncomfortable. The losses were not caused simply because people had SMSFs. They arose after personal financial advice and product recommendations. But the claimants were often SMSF trustees, which is why Treasury is examining whether SMSFs should contribute to future CSLR funding. For the advice-quality background, see our earlier update on [ASIC's SMSF advice review and audit implications](/newsletter/asic-smsf-advice-review-audit-2026). ### The future pressure point: Shield and First Guardian The Shield Master Fund and First Guardian Master Fund collapses are the next pressure point. ASIC has said the collapses involved multiple advice licensees, platforms and super trustees. Together, they put an estimated $1.1 billion in retirement savings at risk. ASIC has also said more than $420 million has been returned to investors through enforcement activity to date, but multiple matters remain before the courts or under investigation. On 21 May 2026, [ASIC filed civil penalty proceedings against Equity Trustees Superannuation Limited](https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-101mr-asic-sues-equity-trustees-alleging-first-guardian-onboarding-failures/), alleging First Guardian onboarding failures. The CSLR's FY2026-27 initial levy estimate specifically says it does not include the impact of Shield and First Guardian. That means the published $137.5 million estimate may not represent the full funding pressure still to come. ## How much has the CSLR cost so far? The levy numbers explain why the funding debate has escalated.
CSLR Levy Metrics: SMSF complainant share and levy amounts as at February 2026
Metric Figure
SMSF complainants as a share of all paid and pending CSLR cases 93.1%
Approximate compensation represented by those SMSF cases $154.14 million
Amount relating to financial advice sub-sector and Dixon Advisory $152 million
FY2025-26 revised levy estimate for personal financial advice $67.289 million
FY2026-27 initial levy estimate, total $137.5 million
FY2026-27 initial levy estimate, personal financial advice $126.9 million
Source: Treasury CSLR consultation paper and CSLR FY2026-27 initial levy estimate. The FY2026-27 initial levy estimate allocates $126.9 million of the total $137.5 million to personal financial advice. That is $106.9 million above the $20 million annual sub-sector cap, which is why a revised estimate and special levy process is expected. The scheme was designed to spread costs across years and sub-sectors. Instead, one sub-sector is absorbing almost the whole initial estimate, and the next wave of claims has not been fully quantified. ## Could SMSF trustees be required to pay a CSLR levy? In April 2026, Treasury released the consultation paper [Compensation Scheme of Last Resort (CSLR): Reform options to support ongoing sustainability](https://consult.treasury.gov.au/c2026-725938). One reform option considers whether SMSFs should be included in the CSLR special levy framework. The current position is: - SMSF members may be able to receive CSLR compensation if they have an eligible unpaid AFCA determination. - SMSFs do not currently contribute to the CSLR levy base as a sector. - Treasury is consulting on whether that should change. Two possible models were raised: an opt-in model and an opt-out model. Neither model has been legislated. No per-fund amount has been set. Financial Services Minister Daniel Mulino has publicly indicated that any SMSF involvement would be with no compulsion, but the final policy position has not been announced. The consultation opened on 7 April 2026 and closed on 22 May 2026. ## Opt-in vs opt-out: what each model would mean Treasury's consultation paper raised two broad ways SMSFs could be connected to CSLR funding.
CSLR Opt-In vs Opt-Out Model Comparison for SMSF Trustees
Trustee issue Opt-in model Opt-out model
How it works SMSFs choose whether to participate and pay a levy. SMSFs are included by default unless they actively opt out.
Who pays Only participating funds. All included funds unless they opt out.
Who can claim Only participating funds. Funds that remain covered.
Main trustee issue Not participating may mean losing future CSLR access. Doing nothing may mean paying a levy for cover the fund may never use.
Under an **opt-in model**, a trustee would actively elect to participate and pay the levy. The benefit is control: funds that do not want the cover do not pay. The challenge is adverse selection. Funds that use advisers, or that think they may need the safety net, are more likely to opt in. Under an **opt-out model**, SMSFs would be covered unless they take action to leave. This creates a broader funding base, but it also means trustees could pay unless they actively opt out. In both models, the trade-off is similar: paying a levy may preserve access to CSLR compensation, while declining participation may remove access if future advice losses occur and the adviser or licensee cannot pay. That is a policy trade-off, not a decision trustees need to make today. --- **Want SMSF updates from Super Informed?** [Subscribe to Super Informed](/subscribe) --- ## What the SMSF Association says The SMSF Association opposes both models. Its main argument is that the SMSF structure did not cause the losses. In the cases driving the CSLR blowout, the problem was the advice and the products recommended, not the fact that the investor used an SMSF. The Association has also argued that: - enforcement delays should not be shifted onto SMSF trustees who did not create the problem; - SMSF rollovers are often deliberate decisions by people with existing SMSF balances, not simply vulnerable consumers being pushed into new structures; - individual fund elections across more than 600,000 SMSFs would be difficult and costly to administer. That position sits against the government's sustainability problem: the current levy settings are struggling with claims that are heavily linked to SMSF complainants. Both points can be true. The losses may have been caused by advice and product failures, while the scheme may still need a broader funding answer. ## What SMSF trustees should consider now No SMSF levy has been legislated. No election needs to be made. No per-fund cost has been announced. There are still three practical points for trustees to understand. ### This is not just an industry policy issue If SMSFs are ever brought into the CSLR levy framework, participating funds could face a new annual cost. The amount would depend entirely on the structure. To show the range, here are simple illustrative examples based on the $137.5 million FY2026-27 initial levy estimate and roughly 600,000 SMSFs.
Illustrative SMSF CSLR Levy Costs by Contribution Scenario (FY2026-27)
Scenario Total SMSF levy pool Illustrative per-fund cost
Small contribution: 5% of total levy $6.9 million About $11.50
Moderate contribution: 10% of total levy $13.8 million About $23
Proportional to SMSF share of paid and pending cases $128.0 million About $213
These are illustrative calculations only. Treasury has not proposed these exact amounts, and the actual outcome could be very different. The point is that the policy design matters. A small broad levy is very different from a levy tied closely to SMSF-linked claim experience. ### Opting out may carry a real trade-off If an opt-out model were introduced, trustees who opt out may avoid the levy but lose access to CSLR compensation. For a fund that never uses personal financial advice, that may feel acceptable. For a fund that relies on advice for [investment strategy](/smsf-guides/smsf-investment-strategy), property decisions, pensions, contributions or estate planning, giving up the last-resort safety net could be more significant. That does not mean trustees should opt in or opt out. It means the final rules would need to be read carefully before making any election. ### Advice costs may rise regardless Even if SMSFs are not directly levied, trustees who use financial advisers may still feel the impact. The personal financial advice sub-sector is already facing the largest CSLR levy burden. If advice practices pass some of that cost through, SMSF trustees may see it indirectly through higher advice fees. For a broader cost framework, see the [SMSF Costs and Fees Guide](/smsf-guides/smsf-costs-fees). ## What to watch after 1 July 2026 The consultation has closed. The next steps sit with Treasury, the Minister and the special levy process. Key milestones to watch: - Treasury's post-consultation position on whether SMSFs should be connected to CSLR funding. - The FY2026-27 revised levy estimate, especially whether Shield and First Guardian materially increase the expected cost. - The Minister's response to any CSLR special levy request after 1 July 2026. - Any legislation or regulations that define an SMSF opt-in or opt-out framework. - Whether advice fees rise as the personal financial advice sector absorbs CSLR levy costs. Until the government announces a final model, this remains a consultation issue rather than an immediate compliance obligation. For current SMSF dates and thresholds, keep the [SMSF Compliance Calendar](/smsf-tools/smsf-compliance-calendar) and [SMSF Rules and Limits](/smsf-tools/smsf-rules-limits) pages handy. ## How to check your financial adviser's credentials The CSLR exists because some firms could not pay compensation after advice failures. That makes adviser due diligence worth doing before there is a problem. ASIC maintains the [Financial Advisers Register](https://moneysmart.gov.au/financial-advice/financial-advisers-register) on Moneysmart. It shows: - who your adviser works for; - the licensee responsible for the advice; - the adviser's qualifications and training; - when they were first authorised; - disciplinary or banning history, where recorded. If your adviser is not listed, or if the licensee shown is unfamiliar, treat that as a prompt for a direct conversation before acting on advice. If you have concerns about advice you have received, AFCA explains its complaint process at [afca.org.au](https://www.afca.org.au/). The CSLR explains eligibility and claims at [cslr.org.au](https://cslr.org.au/). ## Frequently Asked Questions ### Can SMSF members already claim from the CSLR? Yes. SMSF members who received personal financial advice, have an unpaid AFCA determination, and meet the eligibility criteria can lodge a claim with the CSLR. For financial advice matters, compensation is capped at $150,000 per claim. The Treasury consultation is about whether SMSFs should also contribute to funding the scheme, not whether SMSF members can access it. ### How much would an SMSF CSLR levy cost per fund? No per-fund amount has been proposed or decided. The eventual cost would depend on whether any SMSF levy is legislated, which SMSFs are included, and how much of the scheme's cost is allocated to the SMSF sector. The illustrative table above shows why the design matters. ### When will the government decide whether SMSFs pay a CSLR levy? The Treasury consultation closed on 22 May 2026. A key milestone is expected after 1 July 2026, when the CSLR can request its FY2026-27 special levy from the Minister. Any change to include SMSFs in a levy framework would need to be implemented through the policy and legislative process. ### What caused the current CSLR funding pressure? The Dixon Advisory collapse is the main current driver. Treasury's consultation paper said most paid and pending CSLR cases involving SMSF complainants relate to Dixon Advisory and the financial advice sub-sector. The Shield Master Fund and First Guardian Master Fund collapses may add further pressure once related claims are quantified. ### Should I opt in or opt out if an SMSF CSLR model is introduced? Neither model has been legislated, so there is no decision to make yet. If a model is introduced, the choice would depend on your fund's circumstances, whether you use personal financial advice, and the value you place on access to last-resort compensation. That would be a matter to discuss with a qualified adviser when the final rules are known. ### Does the CSLR cover all types of financial advice losses? No. The CSLR covers eligible unpaid AFCA determinations in specified areas, including personal financial advice, securities dealing, credit intermediation and credit provision. It does not cover poor investment performance, general market losses, or every dispute with a financial firm. ### What is AFCA and how does it relate to the CSLR? AFCA is Australia's external dispute resolution body for financial services complaints. A consumer generally needs an unpaid AFCA determination before the CSLR can consider a claim. In simple terms: AFCA determines the complaint first. The CSLR may then step in if the firm cannot pay and the claim meets the CSLR eligibility rules. ### What should I do if I received advice connected to Dixon Advisory, Shield or First Guardian? If you suffered loss after receiving personal financial advice and have not already complained, consider reviewing AFCA and CSLR guidance and seeking professional help. AFCA complaints are free to lodge, but eligibility and time limits can depend on the facts. Do not assume a claim is available or unavailable without checking the current rules. ---