The Compensation Scheme of Last Resort estimates it will require at least $137.5 million to pay eligible claims in the year to June 2027. 

The figure is up 82% from the current financial year’s $75.69 million, and the CSLR expects to make a higher levy estimate in June to include the impact of recent failures of Shield Master Fund and the First Guardian Master Fund. 

It will request a Special Levy for fiscal 2027 in June to make up what the Financial Services Council says is a “staggering” $106.9 million funding shortfall. 

The industry-funded CSLR was launched last year to pay compensation to claimants when an eligible Australian Financial Complaints Authority ruling remains unpaid.  

Its legislation states that when its regular $20 million funding by each of four financial services sub-sectors is inadequate, a special levy can be imposed.  

In what the Insurance Council of Australia calls cross-subsidisation, this is paid in part by general insurers, even though the scheme does not apply to general insurance claims due to higher solvency standards imposed on the sector by regulators.  

“We do not support cross-subsidisation which essentially requires companies that meet expected ethical and prudential standards to underwrite those who do not,” the ICA says. 

FSC CEO Blake Briggs says “socialising the cost” of investment losses is “not a sustainable long-term solution for a scheme that is on track to have continued cost blow outs. 

He “opposes normalising the use of special levies as a routine funding mechanism” and says they are a de-facto tax on business.  

“Without urgent reform to the CSLR’s design, special levies on industry will again be required to meet the gap for the foreseeable future,” Mr Briggs said. “This is another blow to law abiding financial advice businesses ... called on to pay ... for the wrongdoing of others.” 

The CSLR says the estimated 2027 funds will process of 912 claims, mostly for personal financial advice.  

It warns Shield and First Guardian  are "expected to lead to significant complaint volumes” and assumes an average claim size compensation of $99,750. 

Around 11,800 investors are reportedly affected, and AFCA plans a new dedicated workforce to address these complaints with capacity to deliver around 100 extra determinations a month.