Financial advisers say a planned special levy to plug a gap in Compensation Scheme of Last Resort funding should be “spread as broadly as possible” across subsectors.

Treasury flagged several options last month after revised estimates showed the industry-funded scheme needs $75.7 million this financial year, of which $67.3 million is attributed to the financial advice subsector.

The scheme has a levy cap of $20 million per subsector, but its legislation states a special levy can be imposed to cover excess claims costs.

“We have proposed that the amount above the $20 million sector cap ... be allocated to the broadest possible range of sectors, on the basis of capacity to pay,” Financial Advice Association Australia CEO Sarah Abood said.

“If the levy is spread as broadly as possible, it is likely to be more sustainable and pose less risk of threatening the viability of any one sector.”

She says it is inappropriate to ask financial advisers to pay more than the sector cap.  

“The $20 million sector cap is already very high, particularly when you bear in mind that the vast majority of this levy is paid by small, privately owned firms with very limited capacity to absorb extra costs.”

The association’s submission to Treasury says the profession is under pressure, having almost halved in size since 2019 to 15,364 operators at the end of last financial year.

“These small businesses have a very limited ability to absorb additional compliance costs. The cumulative impact of the CSLR levy on top of other government cost recovery action and mandatory fees and expenses will also serve to further reduce adviser numbers and increase the cost of financial advice, putting it out of reach of more Australians.”