Advisers have urged the federal government to reconsider a planned $10 million special charge on the profession to pay for the Compensation Scheme of Last Resort’s FY27 funding gap.

Financial Advice Association Australia suggests the sum be reapportioned to retail-facing subsectors – a group that includes general insurance product providers and distributors.

“Set the ... allocation to financial advice for 2026-27 at zero ... in recognition of the unsustainable impact on small businesses,” the association says in a submission to Treasury.

The federal government has imposed a special levy on the financial services sector to raise $170.62 million to cover the CSLR funding gap this financial year.

It has chosen a “waterfall” model to spread the levy across three tiers, according to a Treasury consultation paper.

Tier 1 is for the subsector primarily associated with the CSLR’s losses; tier 2 is any subsectors assessed as sufficiently connected to the losses; and tier 3 is retail-facing financial services sectors.

The association says it recognises that “difficult trade-offs have been made, anchored by the imperative to compensate victims without further delay. However, the proposed allocation still places a material cost on a small business sector that has already paid its $20 million cap.”

Other suggestions in the FAAA submission include ways to strengthen the compensation scheme.

“We recommend temporary levy relief for small financial advice businesses, broader reforms to address the drivers of CSLR costs, and that victims be compensated as soon as possible, noting there are no legislative barriers to payments being made by the government before the determination is tabled in parliament.”