EXPLANATORY STATEMENT
Issued by authority of the Compensation Scheme of Last Resort Limited
Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost
Estimates for 2026-27 Levy Period) Determination 2025
Section 9 of the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023 (CSLR Collection Act) provides that the Compensation Scheme of Last Resort (CSLR) operator may determine an estimate of the total amount of claims, fees and costs for a levy period.
The CSLR provides compensation to eligible consumers where an unpaid determination made by the Australian Financial Complaints Authority (AFCA) relates to a financial product or service within the scope of the scheme. The CSLR is industry-funded and supports confidence in the financial system’s external dispute-resolution framework.
The legislative framework for the CSLR comprises the Financial Services Compensation Scheme of Last Resort Levy Act 2023 (CSLR Levy Act), CSLR Collection Act, the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023 (CSLR Regulations), and the Corporations Act 2001 (Corporations Act).
The CSLR Levy Act establishes the basis for imposing the annual levy and, when required, the special levy. Section 8 of the CSLR Levy Act provides that the annual levy can be imposed on a person if the person is a member of a sub-sector prescribed by the CSLR Regulations and the general conditions (if any) prescribed by the regulations are met for the person and the levy period. Section 6 of the CSLR Regulations sets out the sub-sectors that are subject to the annual levy. Section 7 sets out the general conditions for the imposition of the annual levy. Part 3 of the CSLR Regulations provides for the rules for calculating the annual levy and special levy.
Each sub-sector is subject to a maximum annual levy cap of $20 million under paragraph 17(2)(a) of the CSLR Levy Act. Any amount above this cap can only be recovered through a special levy made by the Minister under section 1069H of the Corporations Act.
The purpose of the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for 2026-27 Levy Period) Determination 2025 (Determination) is to establish the initial cost estimates for the 2026–27 levy period, thus allowing the Australian Securities and Investments Commission (ASIC) to impose and collect the annual levy from relevant sub-sectors in accordance with the CSLR Collection Act and the CSLR Regulations.
The Determination specifies for each sub-sector:
• the total amount of compensation expected to be payable under section 1063 of the Corporations Act;
• AFCA’s unpaid fees expected for each month of the levy period;
• the CSLR’s and ASIC’s administrative costs for the levy period;
• the relevant capital-contribution amount; and
• any specified shortfall or excess amounts carried forward from earlier levy periods.
The 2026–27 levy period represents the fourth levy period for the scheme and the second full financial year of CSLR operations.
The Act does not specify any conditions that need to be satisfied before the power to make the Determination may be exercised.
Prior to registration, the CSLR operator published the actuary report with the calculations for the 2026-27 levy period and met with stakeholders. The CSLR operator did not otherwise undertake public consultation on the Determination.
In accordance with section 9 of the Collection Act, the operator must reasonably believe the estimates are accurate, having had regard to actuarial principles. Actuarial expertise was engaged to inform the 2026–27 estimates.
The Determination a legislative instrument for the purposes of the Legislation Act 2003.
The Determination is subject to disallowance by the Parliament.
The Determination commenced on the day after registration on the Federal Register of Legislation.
Details of the Determination are set out in Attachment A.
A statement of Compatibility with Human Rights is at Attachment B.
ATTACHMENT A
Details of the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for 2026-27 Levy Period) Determination 2025
Part 1 – Preliminary
Section 1 – Name
The title of the instrument is the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2026–27 Levy Period) Determination 2025 (Determination).
Section 2 – Commencement
The Determination commences on the day after registration on the Federal Register of Legislation.
Section 3 – Authority
The Determination is made under section 9 of the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023 (CSLR Collection Act).
Section 4 – Definitions
The Determination contains definitions for key terms. The definitions for the sub-sectors take their meaning from the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
A note informs that the expressions have the same meaning in the Determination as in the CSLR Collection Act as in force from time-to-time and directs attention to paragraph 13(1)(b) of the Legislation Act 2003.
Part 2 – Estimates of claims, fees and costs for 2026-27 levy period
Section 5 – Credit intermediaries sub-sector
The Determination provides the estimated amount for the credit intermediaries sub-sector for the 2026–27 levy period is $2,155,918.33. The amount is determined in accordance with subsection 9(1) of the CSLR Collection Act and reflects the expected compensation payable and the administrative and fee components set out in paragraph 9(1)(b), adjusted for the excess amounts identified in section 6 of the Determination.
Section 6 – Excess amount – credit intermediaries sub-sector
The Determination provides the excess amounts that apply to the credit intermediaries sub-sector under subsection 9(2) of the CSLR Collection Act are $573,244.37 for the earlier levy period and $0 for the current levy period. These amounts must be deducted in calculating the final estimate for that sub-sector.
Section 7 – Credit providers sub-sector
The Determination provides the estimated amount for the credit providers sub-sector for the 2026–27 levy period is $2,003,430.97. This estimate is determined using the method in subsection 9(1) of the CSLR Collection Act, comprising the compensation amount and the required administrative and fee components, subject to the excess amounts set out in section 8 of the Determination.
Section 8 – Excess amount – credit providers sub-sector
The Determination provides the excess amounts for the credit providers sub-sector that must be considered under subsection 9(2) of the CSLR Collection Act when calculating the total estimate for that sub-sector are $137,026.75 for the earlier levy period and $0 for the current levy period.
Section 9 – Licensed personal advice sub-sector
The Determination provides the estimated amount for the licensed personal advice sub-sector for the 2026–27 levy period is $126,851,045.47. The estimate is made in accordance with subsection 9(1) of the CSLR Collection Act and includes the expected compensation amount, unpaid AFCA fees and administrative cost components, reduced by the excess amounts specified in section 10 of the Determination.
Section 10 – Excess amount – licensed personal advice sub-sector
The Determination provides the excess amounts for the licensed personal advice sub-sector that must be deducted under subsection 9(2) of the CSLR Collection Act in determining the final estimate for that sub-sector are $3,606,235.67 for the earlier levy period and $0 for the current levy period. These amounts must be deducted in calculating the final estimate for that sub-sector.
Section 11 – Securities dealers sub-sector
The Determination provides the estimated amount for the securities dealers sub-sector for the 2026–27 levy period is $6,484,092.08. The estimate is determined by applying the calculation method in subsection 9(1) of the CSLR Collection Act, incorporating the compensation and administrative components, and adjusted for the excess amounts identified in section 12 of the Determination.
Section 12 – Excess amount – securities dealers sub-sector
The Determination provides the excess amounts for the securities dealers sub-sector that are required to be applied under subsection 9(2) the CSLR Collection Act in calculating the final estimate are $82,369.71 for the earlier levy period and $0 for the current levy period. These amounts must be deducted in calculating the final estimate for that sub-sector.
ATTACHMENT B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2026–27 Levy Period) Determination 2025
This Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2026–27 Levy Period) Determination 2025 (Determination) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Determination determines the cost estimates for the 2026–27 levy period under the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023.
Human rights implications
The Determination does not engage any of the applicable rights or freedoms.
Conclusion
The Determination is compatible with human rights as it does not raise any human rights issues.