Draft CSLR Special Levy: Why Brokers Are Facing a Bill That Is Not Theirs to Pay

TL;DR

• Treasury has opened consultation on a $170.26 million CSLR special levy, the first use of its new waterfall framework.
• Credit intermediaries, the sub-sector covering mortgage and finance brokers, face a proposed $7.79 million special levy charge.
• Combined with the estimated $2.2 million annual levy, the sub-sector's total CSLR levy contribution for the year would reach about $9.9 million.
• The $170.26 million shortfall exists because $190.26 million of the $198.07 million total CSLR estimate was attributed to personal financial advice, and ASIC can collect no more than $20 million annually from that sub-sector.
• Industry bodies have argued brokers should not fund losses from unrelated, higher-risk sectors. Submissions close 5 October 2026.

The numbers are not small, and the logic behind them is contested.

For most brokers, the Compensation Scheme of Last Resort sits in the background as a compliance line item. The draft CSLR special levy released by Treasury changes that. The proposed charge would make credit intermediaries one of the larger contributors to a shortfall that originated almost entirely in personal financial advice.

What is the CSLR levy shortfall and where did it come from?

The CSLR operator's revised estimate for the year puts total claims, fees, and costs at $198.07 million. Of that figure, $190.26 million was attributed to the personal financial advice sub-sector. ASIC's annual collection cap for that sub-sector is $20 million, which leaves $170.26 million to be recovered through a special levy. Treasury's consultation is about how that $170.26 million gets distributed.

The CSLR levy framework that governs this distribution is new. Financial Services Minister Daniel Mulino announced the rules-based waterfall model as part of a broader CSLR reform package in August. The current consultation is the first time it has been applied in practice.

How does the waterfall model actually work?

The waterfall runs across three tiers. Under Tier 1, the primary sub-sector associated with the losses pays up to $20 million. The financial advice sector is proposed to contribute an additional $10 million here, on top of its $20 million annual levy. Under Tier 2, sectors deemed sufficiently connected to the losses can each pay up to $40 million. Responsible entities of managed investment schemes are proposed to contribute $40 million at this tier. The remaining $120.26 million then falls to Tier 3, where it is spread across 21 retail-facing financial-services sub-sectors.

Credit intermediaries sit in Tier 3. The proposed CSLR levy allocation for the sub-sector at that tier is $7.79 million. Add the estimated $2.2 million annual levy and the total CSLR levy contribution for the year reaches about $9.9 million.

For context, the special levy component alone is a substantial increase on the $667,529 special levy paid in the prior financial year.

Is the broker industry's objection to the CSLR levy reasonable?

Greg Ashe, director of compliance and regulatory consultancy QED Group, was direct in his assessment. He said the model forces industries outside personal financial advice to fund the consequences of its failures. His words, as reported by The Adviser: "I see a lot to be really aggrieved about. This is unashamedly all about everyone else subsidising failure in personal financial advice."

Industry bodies have made a similar argument repeatedly. The position is that mortgage and finance broking generates very low CSLR claim and complaint volumes, and that the sub-sector should not be required to cross-subsidise a shortfall it did not create.

The waterfall model was designed to address exactly this kind of concern by tying levy allocation more closely to the source of losses. Critics argue the Tier 3 mechanism still distributes the residual broadly enough that the connection between cause and cost becomes thin.

This is a compliance and cost question, not an abstract policy debate. A CSLR levy of this size affects operating margins for smaller brokerages. It also raises a broader question about how regulators price systemic risk across sub-sectors that have different risk profiles but share a levy pool.

Brokers who want to understand how regulatory cost pressures interact with the case for operational efficiency can read more about what it costs a finance broker to ring back every enquiry and how after-hours call handling affects lead conversion. Neither post is about the CSLR levy directly, but both speak to the margin environment brokers are operating in.

The full Treasury consultation document is available via The Adviser's coverage of the draft CSLR special levy. Submissions close 5 October 2026. If your aggregator or industry body is coordinating a response, that is the relevant deadline.

FAQs

What is the proposed CSLR levy amount for credit intermediaries?
Treasury's draft proposes a $7.79 million special levy on the credit intermediaries sub-sector, which covers mortgage and finance brokers. Combined with the estimated $2.2 million annual levy, the total CSLR levy contribution for the year would be about $9.9 million.

Why are brokers being asked to contribute to a shortfall caused by financial advice failures?
Under the waterfall model's Tier 3, the residual balance after Tier 1 and Tier 2 contributions is spread across all 21 retail-facing financial-services sub-sectors. Credit intermediaries fall into that group regardless of their own claim and complaint volumes. Industry bodies have argued this is unfair, and the objection is on the record with Treasury.

How does the new waterfall model differ from the previous CSLR levy approach?
The waterfall framework is the first rules-based structure applied to CSLR special levy distribution. It attempts to tie costs more closely to the source of losses through three tiers, with the primary sub-sector paying first and connected sectors contributing before the remainder is spread broadly. This consultation is its first operational use.

When do submissions on the draft CSLR special levy close?
Submissions close on 5 October 2026. Brokers with a view on the allocation methodology should submit directly or through their aggregator or industry body before that date.

How much did credit intermediaries pay in the previous CSLR special levy?
The special levy paid by the sub-sector in the prior financial year was $667,529. The proposed $7.79 million special levy for the current year represents a substantial increase on that figure.

Originally published at theautomate.io.