Compensation Scheme of Last Resort (CSLR) - eligible AFCA determinations and firms
Which unpaid AFCA determinations are covered by the CSLR: personal advice, credit intermediation, securities dealing and credit provision; caps and the post-Dixon levy outlook.
What CSLR covers
The Compensation Scheme of Last Resort CSLR - Compensation Scheme of Last Resort provides compensation for unpaid AFCA determinations. It was established by the Financial Services Compensation Scheme of Last Resort Levy Act 2023 and commenced on 2 April 2024.
The scheme covers determinations issued by the Australian Financial Complaints Authority (AFCA) within four sub-sectors: personal financial advice on relevant financial products; credit intermediation (mortgage and finance brokers); securities dealing; and credit provision. Certain activities are outside the scope of the CSLR, including general insurance broking, claims handling, managed investment schemes (other than securities dealing) and superannuation trusteeship.
Compensation paid by the CSLR is capped at $150,000 per eligible AFCA determination. Determinations issued by AFCA on or before 7 September 2022 are designated 'pre-CSLR' and are funded separately.
Eligibility tests
To be eligible for compensation from the Compensation Scheme of Last Resort (CSLR), a complainant must have an AFCA determination confirming the financial firm has not paid compensation within the required period. The underlying complaint must relate to conduct that fell within AFCA’s jurisdiction and the four in-scope sub-sectors. ASIC RG 271 internal dispute resolution provides further detail on AFCA’s jurisdiction.
A key requirement for CSLR eligibility is that the financial firm is insolvent or otherwise unable to pay. This is typically evidenced by events such as liquidation, cancellation of AFCA membership, or ongoing non-payment after a formal demand for payment.
CSLR considers claims for loss of capital, loss attributable to negligent advice, and direct financial loss. However, claims for loss of opportunity are not considered. All claims must be initially processed through AFCA, which will assess the eligibility of the claim before any payment is made by CSLR.
Funding and levies
The Compensation Scheme of Last Resort (CSLR) is funded through an annual scheme levy, capped at a total of $250 million across all sub-sectors. Within this overall cap, each sub-sector is subject to a $20 million annual limit, although the responsible Minister can determine a special levy if required.
The Commonwealth provides funding for historical complaints lodged on or before 7 September 2022. Subsequent claims, particularly those relating to Dixon Advisory and Superannuation Services and United Global Capital, have necessitated a special levy. For the 2025-26 financial year, a $47.3 million special levy will be applied to personal advice. AFSL best interests duty section 961B obligations are relevant to firms providing personal advice.
The Australian Securities and Investments Commission (ASIC) administers the levies and collects them from in-scope licensees. The amount each licensee contributes is determined in proportion to their revenue.
Interaction with AFSL and AFCA obligations
AFSL holders, credit licensees and authorised representatives within the four sub-sectors are required to be both members of AFCA and levy-payers for the CSLR - Compensation Scheme of Last Resort. This means firms must adhere to AFCA’s processes and determinations. Failure to comply with an AFCA determination constitutes a breach of AFCA membership, and ASIC has the power to cancel a licence as a result.
Internal dispute resolution, as outlined in ASIC RG 271, remains the initial process for resolving consumer complaints. The CSLR is engaged only after AFCA has issued a final determination and the firm has not made the required payment. This sequence ensures AFCA’s dispute resolution process is exhausted before the CSLR is triggered.
Firms must continue to maintain adequate compensation arrangements, such as professional indemnity insurance, as required by s 912B of the Corporations Act. The CSLR does not replace the need for these existing arrangements. Consumers have a timeframe of 12 months from the date they are notified by AFCA that a determination remains unpaid to lodge a claim with the CSLR - Compensation Scheme of Last Resort.
Frequently asked
Is the CSLR available for managed investment scheme losses?
Generally no. CSLR covers personal advice on relevant financial products (which can include advice about MIS interests), securities dealing, credit provision and credit intermediation. Direct losses from a failed MIS operator are not in scope unless they fall within those sub-sectors.
What is the maximum CSLR payment?
$150,000 per eligible AFCA determination. Where loss exceeds this, the consumer can keep their AFCA determination and pursue the firm directly for the balance.