You can win and still not be paid.
That is the uncomfortable fact at the centre of Australia’s consumer protection framework for financial services. The Australian Financial Complaints Authority can investigate your complaint at no cost to you and order a firm to compensate you up to $1,263,000. But if that firm has collapsed, the determination is a piece of paper. The Compensation Scheme of Last Resort then steps in, and it pays a maximum of $150,000.
Most people discover that gap at the worst possible moment. It is far more useful to understand it beforehand, because it should influence how you structure a portfolio and how much you are willing to have riding on any single recommendation.
This guide sets out what protection actually exists, where the limits sit, what the scheme does not cover, and why it is currently under more pressure than it was designed for.
Three layers, in order
| Layer | What it is | Limit |
|---|---|---|
| 1. Internal dispute resolution | A complaint to the firm itself. Required first step. | Whatever the firm agrees to |
| 2. AFCA | Free, independent external dispute resolution. Determinations bind the firm. | Up to $1,263,000 for most non-superannuation claims. No monetary limit in the superannuation jurisdiction. |
| 3. CSLR | Pays where an AFCA determination goes unpaid, usually because the firm is insolvent. | $150,000 per claim |
You cannot skip a step. AFCA will generally direct you back to the firm if you have not complained there first, and the CSLR only becomes available once you hold an unpaid AFCA determination.
Step one: complain to the firm
Every Australian financial services licensee must have an internal dispute resolution process. Put the complaint in writing, say what happened, what loss you say you suffered and what outcome you want.
Firms generally have 30 calendar days to give you a written response for standard complaints, with different timeframes applying to superannuation and certain credit matters. If they do not respond in time, or the response does not resolve it, you can take the matter to AFCA.
Keep the correspondence. AFCA will want to see it, and a clear written record of what you complained about and when is worth more than a good memory later.
Step two: AFCA
AFCA began operating on 1 November 2018, consolidating the previous ombudsman schemes. Membership is compulsory for financial services and credit licensees and for superannuation trustees, which is why checking AFCA membership is a basic verification step before dealing with anyone.
How it works
- It is free for consumers. There is no filing fee and you do not need a lawyer, although you can use one.
- Most complaints settle. AFCA works through negotiation and conciliation first, and only a minority proceed to a formal determination.
- A determination binds the firm, not you. If you accept it, the firm must comply. If you reject it, you keep your legal rights and can pursue the matter in court.
- Costs are limited. A firm may be asked to contribute to your legal, professional or travel costs, but generally no more than $5,000.
Time limits
Broadly, you must lodge with AFCA within two years of receiving the firm’s internal dispute resolution response, or, where no response was given, within six years of when you first became aware, or should reasonably have become aware, of the loss. Superannuation complaints have their own rules.
These limits matter more than people expect, because investment losses are often only recognised long after the advice was given. If you think something has gone wrong, get advice on the timing early rather than waiting to see whether things recover.
The monetary limits
For non-superannuation complaints lodged from 1 January 2024, AFCA can consider claims where the amount claimed does not exceed $1,263,000, or $6,317,000 for a credit facility provided to a small business or primary producer. Compensation caps per claim vary by claim type, with lower caps applying to categories such as income stream insurance and general insurance.
These figures are adjusted every three years under AFCA’s rules, indexed to the higher of CPI or male total average weekly earnings. The last adjustment took effect on 1 January 2024, so the next is due from 1 January 2027. Confirm the current figures with AFCA before relying on them.
Superannuation is different. The monetary limits do not apply in AFCA’s superannuation jurisdiction, which operates under separate provisions of the Corporations Act.
What AFCA will not do
AFCA resolves disputes between consumers and financial firms. It does not discipline advisers, which is ASIC’s role, and it is not a substitute for checking who you are dealing with in the first place. Our guide on how to check an adviser’s registration and track record covers the verification that comes before all of this.
It also generally will not consider a complaint that is really about a firm’s commercial judgement, or a matter already dealt with by a court, and it cannot compensate you for an investment that simply performed poorly. Loss is not the same as misconduct. The question is whether the advice or conduct was inappropriate, not whether the market fell.
Step three: the Compensation Scheme of Last Resort
The CSLR commenced operations on 2 April 2024. It exists because AFCA determinations against collapsed firms had been going unpaid for years, which the Hayne Royal Commission and the Ramsay Review both identified as a hole in the system.
What it covers
The CSLR can pay up to $150,000 per claim where you hold an AFCA determination awarding compensation that remains unpaid, and the complaint falls within one of four sub-sectors:
- Personal financial advice
- Credit intermediation
- Securities dealing
- Credit provision
Complaints lodged with AFCA on or after 8 September 2022 are generally within scope. Complaints lodged in the earlier period from 1 November 2018 may also qualify where the firm became insolvent during or after the AFCA process but before paying the compensation awarded.
What it does not cover
This is the part most people misread. The CSLR is not a guarantee against investment loss and it is not a product compensation scheme.
It responds to unpaid determinations in those four sub-sectors. It does not cover general insurance, superannuation trustee complaints, or the failure of an investment product as such. If a fund you chose yourself collapses and no licensed firm gave you inappropriate personal advice about it, there is generally no determination for the scheme to respond to.
It is also funded by levies on the financial services industry, including on advice firms like ours, rather than by government appropriation. That funding model is where the current strain is showing.
The gap between the two numbers
Put the caps side by side and the practical position becomes clear.
| If the firm is | You may recover up to |
|---|---|
| Solvent and complies with the determination | $1,263,000, subject to the cap for your claim type |
| Insolvent, with the CSLR responding | $150,000 |
Whether you recover eight per cent of a large loss or all of it depends on something entirely outside your control: whether the firm that gave you the advice is still solvent when the determination is made.
The scale is not theoretical. AFCA awarded $117 million in compensation to eligible CSLR complainants in 2024-25 alone, with Dixon Advisory complaints still the largest single group it has ever handled, and close to 50 financial firms linked to CSLR eligible matters. The subsequent collapses connected to the Shield and First Guardian funds have pushed reported investor losses towards a far larger figure again, well beyond what the scheme was sized for.
For anyone who lost several hundred thousand dollars, a $150,000 cap is a partial recovery, not a remedy.
Why the scheme is under review
The CSLR is funded by sub-sector levies subject to an annual cap, and demand has run well ahead of the original modelling.
Treasury issued a consultation paper in April 2026 on reforms to the scheme, including how levies should be allocated across sectors. A special levy of substantial size has been required to meet the shortfall, and the government has indicated it wants any special levy spread broadly across retail facing sectors rather than concentrated on financial advice.
One striking figure from that consultation: as at 28 February 2026, cases involving self managed superannuation fund complainants accounted for around 93.1 per cent of all paid and pending CSLR cases, representing approximately $154 million in compensation. That has prompted debate about whether SMSF trustees and large superannuation funds should contribute to funding, which is not currently the case.
Separately, Treasury consulted between December 2025 and February 2026 on the effectiveness of professional indemnity insurance in responding to compensation claims, which is the layer that is supposed to prevent claims reaching the CSLR at all.
The relevant point for a consumer is simply this: the settings described in this article are under active review and may change. The $150,000 cap in particular is the subject of ongoing debate.
What this should change about how you invest
Here is the practical consequence, and it is worth more than knowing the complaint procedure.
Treat $150,000 as the realistic worst case recovery. If a single recommended investment could cost you materially more than that, and the recommending firm could plausibly not survive the fallout, you are carrying uninsured risk regardless of how many licences and registrations check out.
Be especially careful with concentration in unlisted products. The pattern in the recent collapses is consistent: a large share of someone’s superannuation moved into a single unlisted fund on the recommendation of one adviser. Diversification is usually discussed as a return question. It is also a compensation question.
Verify before you invest, not after. Licence, adviser registration, AFCA membership, and the specific product. Our guides on investment scams targeting retirees and the questions to ask an adviser cover that groundwork.
Understand what advice you are actually receiving. The CSLR sub-sector is personal financial advice. Whether what you received was personal advice or general advice affects the obligations owed to you and what can be complained about. Our guide on general advice versus personal advice explains the distinction.
Keep records of who advised you and under which licensee. Complaints attach to the licensee responsible at the time. Where an adviser has changed licensees or a practice has been sold, that history determines where a complaint belongs. Our guide on what happens when an adviser retires or sells deals with that.
Making a complaint
- Complain to the firm in writing. Set out what happened, the loss, and the outcome you want.
- Wait for the response, generally 30 days for standard complaints.
- Lodge with AFCA if unresolved, online or by phone, free of charge. Check the time limits.
- Provide your documents. Statements of advice, correspondence, statements and file notes. Detail matters.
- Engage with the process. Most complaints resolve by negotiation or conciliation before a determination.
- If you accept a determination, the firm must comply. If it does not, and it falls within a CSLR sub-sector, AFCA will generally refer you towards the CSLR process.
- Be wary of anyone offering to recover your money for a fee. AFCA is free, and recovery scams specifically target people who have already lost money.
Where Professional Advice Adds Value
We should declare the obvious. Advice firms, including ours, pay the levies that fund the CSLR, so we have a direct interest in this subject. What follows is worth reading with that in mind.
Our view is that the compensation framework should be treated as a backstop rather than a plan. It is genuinely valuable, and consumers are considerably better off with it than without it, but the numbers above make clear that recovering a large loss is not something you should rely on.
What that means in practice is that the protection question belongs in portfolio construction rather than in a complaints procedure. How much of your wealth sits in any single product, whether that product is listed or unlisted, whether one adviser’s recommendation could cost you more than can realistically be recovered, and whether you would still be financially secure if it went wrong. Those are the questions that actually determine your exposure, and they are worth asking before an investment rather than after a collapse. Our guide on investment mistakes we see time and time again covers where concentration usually creeps in.
If you are already in dispute with a firm, AFCA is free and does not require representation, and starting there costs you nothing.
Frequently asked questions
How do I make a complaint about a financial adviser?
Complain to the firm in writing first, since internal dispute resolution is a required step and firms generally have 30 days to respond for standard complaints. If it is not resolved, lodge with AFCA, which is free and does not require a lawyer. Separately, you can report misconduct to ASIC, though ASIC does not obtain compensation for individuals.
How much compensation can AFCA award?
For non-superannuation complaints lodged from 1 January 2024, AFCA can consider claims up to $1,263,000, with compensation caps per claim that vary by claim type. The limits are indexed every three years and the next adjustment is due from 1 January 2027. No monetary limit applies in AFCA’s superannuation jurisdiction.
What happens if the firm has gone broke and cannot pay?
You may be able to claim through the Compensation Scheme of Last Resort, which pays up to $150,000 per claim where an AFCA determination remains unpaid and the complaint falls within personal financial advice, credit intermediation, securities dealing or credit provision.
Does the CSLR cover investment losses?
No. It is not a guarantee against investment loss and it is not a product compensation scheme. It responds to unpaid AFCA determinations in four specific sub-sectors. If no licensed firm gave you inappropriate personal advice, there is generally no determination for the scheme to respond to.
Is there a time limit to complain to AFCA?
Broadly, within two years of the firm’s internal dispute resolution response, or within six years of when you first became aware, or should reasonably have become aware, of the loss where no response was given. Superannuation complaints have separate rules. Get advice early rather than waiting to see whether an investment recovers.
Does AFCA cost anything?
It is free for consumers and small businesses, and you do not need a lawyer, although you may use one. A firm may be asked to contribute to your legal, professional or travel costs, generally to a maximum of $5,000. Be cautious of anyone offering to run an AFCA complaint for a percentage of the outcome.
Is the $150,000 cap likely to change?
It is under active review. Treasury consulted in April 2026 on reforms to the scheme’s funding after claim volumes ran well ahead of expectations, and the government has been considering how levies are allocated across sectors. Check the current position with the CSLR and AFCA rather than relying on any published figure.
Taking the next step
If you are in dispute with a financial firm, start with a written complaint and then AFCA. It costs nothing and you do not need representation.
If you are not in dispute, the useful takeaway is a number. Assume $150,000 is what could realistically be recovered if the firm behind a recommendation fails, and then look at your portfolio and ask whether any single position would leave you badly exposed on that assumption. For most people that is a five minute exercise, and occasionally it changes something important.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not legal advice. AFCA’s monetary limits are indexed periodically, the next adjustment being due from 1 January 2027, and the Compensation Scheme of Last Resort was the subject of active Treasury consultation during 2026, so the figures and settings described here may change. Time limits for complaints are strict and vary by complaint type. Confirm current requirements with AFCA and the CSLR, and seek personal advice from a licensed financial adviser, or legal advice where a dispute is significant, before acting.
