A Treasury review of the industry-funded Compensation Scheme of Last Resort has started, less than 12 months after the redress program launched last April.

Assistant Treasurer and Financial Services Minister Stephen Jones announced the review on Friday as the scheme operator released initial actuarial estimates indicating it will need to collect nearly $78 million in levies for the 2025-26 financial year.

About $70.11 million of that is attributed to the financial advice sector, which would exceed the annual levy cap of $20 million per subsector.

Finity, which prepared the estimates, says in the actuarial report: “This means there is an expected shortfall in funding for the financial advice sector of $50.1 million … which will mean that a special levy will be necessary to raise additional funds.”

Under CSLR rules, imposing a special levy requires the scheme operator to lodge a revised estimate within the levy period and a ministerial determination. It is also subject to separate parliamentary approval. The rules also require the scheme to complete a revised levy estimate for FY26.

Mr Jones says ensuring the scheme is sustainably funded is an important part of the review.

“Taking care of consumers is the focus of the scheme,” he said. “While industry has provided broad support for the CSLR, it’s important that there is confidence that the scheme is meeting its objective in a way that is sustainable for both companies and consumers.”

Financial advisers, who have voiced concerns over the scheme set-up, say the sector should not be paying for claims related to Dixon Advisory & Superannuation Services and United Global Capital. The Finity report says 92% of expected claims for 2025-26 relate to the two failed businesses.

“It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country,” Financial Advice Association Australia CEO Sarah Abood said.

“The government surely must now see that the writing is on the wall and that it must fix CSLR immediately.”

The closing date for review submissions is February 28.