Mortgage brokers did not sell the investment fund that collapsed. They did not cold-call retirees, and they did not steer anyone into a self-managed super fund. Yet under a proposed funding model, credit intermediaries are set to pay more than 11 times last year’s compensation levy bill for the fallout.
The numbers explain the anger. The proposed split would see the broker sector’s share rise from about $668,000 to $7.79m. That takes the total for credit intermediaries to roughly $9.9m, or about $67 per credit representative, compared with $5.72 before.
How a $600m fund ends up on a broker’s bill
The collapsed fund gathered more than $600m from over 6,000 Australians. ASIC has launched civil penalty action in the Federal Court against the two men who ran the operator. The regulator alleges about $270m was channelled into vehicles the pair controlled, then moved on with minimal documentation or security to hospitality ventures, offshore recipients and developers. It also claims at least $57m reached entities they controlled and at least $27.9m went unsecured into property projects. These claims are unproven and will be tested in court.
Investors were reportedly reached by cold-calling lead generators, then guided by advisers into retail platforms or SMSFs. Mortgage broking was not part of that chain.
So why are brokers paying? Because the compensation scheme of last resort is funded by industry levies, and when claims in one sector blow past its cap, the overflow is spread across others.
The cost estimate keeps climbing
The scheme’s 2026-27 cost estimate has risen from $137.5m to $198.1m. Advice-related claims account for $190.3m of that, against a sector cap of $20m. That gap is the core of the problem: the cap was never designed for a failure of this size.
Recoveries are thin. Liquidators have clawed back only about $8m from a $512.8m portfolio. That leaves almost the entire bill to be funded by levy.
The waterfall model and who sits at the bottom
Treasury’s proposed approach is a waterfall. Of a special levy of roughly $170.3m:
- Advisers contribute $10m.
- Managed scheme operators pay $40m.
- The remaining $120.26m is shared across 21 sectors.
That last bucket is where brokers land. Credit intermediaries are one of 21 sectors asked to cover costs that began in advice and fund management.
The catch
Spreading a shortfall across many sectors is simple to administer. It also means sectors with no link to the failure carry a large share, which weakens the idea that those who create risk should fund it.
Why the per-head figure matters
Industry bodies dispute the fairness of the allocation and have questioned the methodology. They also warn the cost may be passed down to individual brokers. A jump from $5.72 to about $67 per credit representative is not a business-ending number on its own. But it lands on top of compliance costs, licensing fees and rising professional indemnity premiums.
For a small broking business, the pattern matters more than any single charge. Each new levy narrows margins, and the people most exposed are sole traders and small aggregator groups.
What it could mean for choice
This is where the issue reaches borrowers. Broker numbers shape how many people can compare lenders without walking into each branch. Borrowers using brokers tend to be first-home buyers, investors and those with non-standard income. If rising costs push some brokers out, or force higher fees, the effect is thinner advice for those who lean on it most.
That said, the evidence for a mass exit is not here yet. The available figures show a higher levy, not a measured fall in broker numbers. A one-off special levy is also different from a permanent cost increase. The real test is whether this becomes a recurring pattern.
For readers weighing lender and broker options, our home loans, lenders and refinancing guide sets out how the pieces fit together. Brokers are also facing separate pressure on how they handle documents, as we covered in AI-altered loan documents: who carries the risk when a broker misses one.
What happens next
The proposal is not final. Industry submissions on the methodology will shape whether the share assigned to credit intermediaries holds. The questions to watch are whether Treasury changes the allocation formula, whether the sector cap on advice claims is revisited, and whether any recoveries improve on the $8m so far.
If you use a broker, ask how they plan to handle regulatory costs and whether fees will change. If you are a broker, check how your aggregator intends to apply the levy to individual accreditations.
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General info, not financial advice.
