CSLR — Compensation Scheme of Last Resort explained

Rules Mate EditorialPublished 1 June 20262 min read

How the Compensation Scheme of Last Resort pays unpaid AFCA determinations against financial firms, and how subsector levies are calculated and capped.

What the CSLR is

The Compensation Scheme of Last Resort (CSLR) is an independent, not-for-profit company established to protect consumers. It commenced operations on 2 April 2024.

The CSLR’s primary function is to pay compensation for eligible Australian Financial Complaints Authority (AFCA) determinations that remain unpaid. This provides a safety net for consumers who have been awarded compensation but are unable to recover it from the financial firm.

The maximum amount of compensation the CSLR will pay per claim is $150,000.

Which subsectors are covered

The Compensation Scheme of Last Resort (CSLR) provides compensation within four defined subsectors of financial services. These are personal financial advice, credit intermediation, securities dealing, and credit provision.

The CSLR does not cover all areas of the financial services industry. Specifically, insurance broking, general insurance, life insurance, and superannuation are excluded from the scheme’s coverage.

To be eligible for compensation from the CSLR, a determination must have been made by the Australian Financial Complaints Authority (AFCA) relating to financial misconduct occurring within one of the covered subsectors.

Levy caps and FY2026 shortfall

The Compensation Scheme of Last Resort (CSLR) operates with legislated levy caps to manage the financial contributions from different subsectors. The subsector levy cap is $20 million per subsector for each levy period. The total annual levy across all subsectors is capped at $250 million.

For the financial year 2026, the personal financial advice subsector was allocated $67.289 million. This amount exceeded the $20 million subsector cap, creating a $47.3 million shortfall.

To address this shortfall, the Assistant Treasurer and Minister for Financial Services determined on 11 December 2025 that certain subsectors would be required to pay a special levy.

How firms pay the levy

Firms pay the levy through invoices issued annually by ASIC, acting on behalf of the Compensation Scheme of Last Resort (CSLR). These invoices detail the amount payable for the relevant period.

In addition to annual levies, special levies may be applied. These are triggered when a Minister determines that a subsector cap has been exceeded.

Levy obligations apply to AFCA members operating within covered subsectors, as determined at the levy assessment date. Failure to meet these payment obligations can lead to enforcement action by ASIC, potentially including the cancellation of an Australian Financial Services (AFS) or credit licence.

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Frequently asked

Can a consumer claim directly from the CSLR?

No. The CSLR only pays where AFCA has already made a determination in favour of the complainant and the financial firm has not paid within the prescribed period.

Does CSLR cover managed investment scheme failures?

Generally no — managed investment scheme responsible entities are not a covered subsector. Coverage focuses on personal advice, credit intermediation, securities dealing and credit provision.