3 October 2025
Shadow Assistant Treasurer and Shadow Minister for Financial Services, Pat Conaghan MP, has warned that Labor’s repeated delays risk the financial viability of a key scheme for victims of financial misconduct, following the release of the Compensation Scheme of Last Resort (CSLR) operator’s submission to the CSLR review, which recommended scrapping the controversial “but for” test, among other changes to keep the scheme sustainable.
The ‘but for’ test means that victims of financial misconduct receive not only the principle they invested, but also what they would have made as a return ‘but for’ the bad financial advice. Mr Conaghan said that while the test might look generous, it threatens the viability of the scheme.
“The Coalition went to the last election with a clear plan to remove the ‘but for test’ – and the CSLR operator’s submission confirms exactly why. Ultimately, if the scheme is not sustainable then victims will receive nothing. Decisions like this are tough, but victims deserve a fair, functional and lasting scheme,” Mr Conaghan said.
Mr Conaghan accused the Albanese Government of “dragging its feet while victims wait.” On 31 January 2025, then-Minister Stephen Jones announced that Treasury would undertake a comprehensive review of the CSLR immediately following the release of the 2025-26 levy estimate. Eight months on, Australians are still waiting for action.
On 1 August 2025, Assistant Treasurer Daniel Mulino announced he had asked Treasury to consult on statutory options to apply a special levy to cover excess costs above the advice subsector cap. Mr Conaghan warned the stakes are high: “Without a timely decision, the CSLR will run out of funds – leaving thousands of victims unpaid.”
“The need for another special levy proves the scheme is fundamentally broken. But while Labor delay, there is a real risk that victims will go without. Every month of delay risks leaving families with nothing, while advisers are left with the possibility of unbearable costs on their industry for things that were simply out of their control.”
The Shadow Assistant Treasurer said victims of financial misconduct and the financial advice sector deserved certainty after years of upheaval.
“We have a shrinking financial advice sector because of endless cost pressures, including from the CSLR. Advisers have already shouldered more than their fair share, but now they’re left with a sword hanging over their businesses while Labor ducks the hard decisions about funding.”
Mr Conaghan said the CSLR debacle was “part of a broader pattern of Labor’s indecision in financial services.”
“From the CSLR, to the Quality of Advice Review, to the Managed Investment Scheme review, Australians are frankly tired of endless reviews that never go anywhere – and in some cases are just completely buried.”
Mr Conaghan said the Coalition would remain open to considering sensible, practical changes to ensure the CSLR can deliver on its promise and provide sustainable support for victims.
“We need a CSLR that is sustainable for victims, without putting an undue burden on sectors that had little ability to prevent collapses.”
