The association said urgent government action is needed with data showing the estimated CSLR levy for 2025-26 will more than triple the sector cap as a result of determinations against collapsed firms United Global Capital and Dixon Advisory.

Peter Burgess, SMSFA CEO, said the government’s decision to review the CSLR was urgently needed in the face-off a massive blow-out in expected compensation claims.

“It is unacceptable that advisers should be expected to pay for the failures of firms such as Dixon Advisory Superannuation Services (DASS) and United Global Capital (UGC),” he said.

“We support having the CSLR but it’s important there is confidence that the scheme is meeting its objectives in a way that is sustainable for the industry and consumers. The current funding model is clearly unsustainable and inequitable, posing a risk to the viability of the advice sector and the CSLR.”

He continued that when the sector is striving to make financial advice more accessible and affordable, it is being burdened with a CSLR scheme that punishes ethical advisers for the sins of a tiny minority.

Burgess said it was estimated that the total cost of financial advice claims to be paid from the scheme in 2025-26 would be $70 million – a significant increase from the previous year – with DASS and UGC expected to account for more than 90 per cent of the claims.

“As this amount exceeds the sector cap of $20 million, a special levy will be needed to make up the estimated $50 million shortfall,” he said.

“Given the legislative process that must be followed, it is likely multiple levy invoices will be issued to financial advisers in quick succession, with further levy increases likely in future years. This is not sustainable.”

Furthermore, Burgess said the government review must consider the objectives of the scheme and whether those objectives were being met.

“It should also examine ways of reducing cost by improving the administrative efficiency of the scheme, and how the stability and predictability of CSLR levies can be improved. Importantly, the review must deliver tangible and timely outcomes,” he said.

He noted that “inappropriate SMSF advice” featured prominently in the DASS and UGC implosions.

“This again underlines the importance of specialist SMSF advice. We have always maintained that personal SMSF advice should only be provided by a licensed SMSF specialist. Although this won’t eliminate poor advice behaviour, it will significantly reduce it.”

Sarah Abood, CEO of the Financial Advice Association Australia, said the industry was “shocked” to see an estimated figure of $70 million for the financial advice sector, to cover the cost of claims in the 2025/26 financial year.

“We have also been told that the numbers could be even higher for the 2026/27 financial year. There is currently a sector cap of $20 million per year. Even at that level, the cost per adviser will exceed $1,250. A special levy will be required to fund the remainder of the bill, and we do not yet have any indication as to who will pay this,” she said.

She continued that the two largest contributors to the cost, DASS and UGC, are both clearly product failures, and yet it is financial advisers who will pick up the entirety of the bill.

“It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country,” she said.

“If the government’s intention is to bankrupt financial advisers in every town and every suburb, and rapidly increase the already-high cost of advice, this is an easy way to do it. The government surely must now see that the writing is on the wall and that it must fix CSLR immediately.”

The FAAA has set out its grounds for objections and recommendations to fix problems in the CSLR in a submission to the Senate inquiry but noted that as yet no witnesses have been called and no appearance dates set.

“I am calling on Minister Jones and Treasurer Chalmers to immediately declare their intentions for what will happen to the $50 million of costs that are above the sector cap. It must not be the blameless small business financial advice profession that pays this huge bill, when the people who caused this problem are walking away virtually unscathed,” she said.

“The problems with the CSLR are known, and urgent. In the context of a looming Federal Election, we urge the Minister to act now on fixing the issues that are within his power to resolve.”