Assistant Treasurer Daniel Mulino announced a proposal to expand funding for the Compensation Scheme of Last Resort (CSLR) to include large superannuation funds and self-managed super funds (SMSFs).

The move comes as the Australian government seeks to stabilize a safety net that protects investors from financial misconduct. If implemented, the change would broaden the financial burden of compensation across the superannuation sector to ensure the scheme remains solvent.

Mulino said the CSLR is under huge pressure and the government needs to consider contributions from large super funds and SMSFs to ensure victims are compensated [1]. This pressure follows significant losses suffered by investors in high-profile misconduct cases, including the First Guardian and Shield investment funds [1]. These losses have exceeded the original funding assumptions of the scheme [1].

Under the current funding mechanism, the CSLR is supported by a 0.15% levy on the assets of all superannuation funds [1]. The government is now evaluating whether this structure is sufficient to cover the rising costs of investor restitution.

The proposal targets larger institutional funds and SMSFs to create a more robust funding base. This would shift more of the cost of failure from the general taxpayer or smaller funds toward the larger entities within the financial system.

Government officials are reviewing the impact of these contributions on overall fund performance. The focus remains on maintaining the integrity of the Australian financial system, while providing a reliable path to recovery for those affected by corporate fraud and misconduct [1].

“The CSLR is under huge pressure and we need to consider contributions from large super funds and SMSFs”

This proposal signals a shift in how Australia manages systemic financial risk. By targeting large super funds and SMSFs, the government is moving toward a 'polluter pays' model where the broader financial industry—rather than a limited pool of assets—buffers the impact of corporate misconduct. This may lead to increased costs for superannuation members as funds pass the levy costs down to the individual investors.