NSW Strata Commissions Review: What the Productivity Commission’s Final Report Means for the Industry

NSW Strata Commissions Review: What the Productivity Commission’s Final Report Means for the Industry

The NSW Productivity and Equality Commission (PEC) has today released its final report into strata manager commissions and it’s a significant moment for anyone involved in NSW strata management. The report follows a review commissioned by the Minister for Better Regulation and Fair Trading and signals that real structural change to how strata managers are paid is now firmly on the government’s agenda.

What the report says

The core finding is straightforward: commission-based payments to strata managers create conflicts of interest that don’t align with the interests of owners and renters. Owners can struggle to understand how these commissions affect the quality and price of the services they receive, and that lack of transparency makes it hard to assess whether their strata manager is acting in their best interests.

The Commission estimates that moving to a fee-for-service model could generate more than $300 million in net benefits for NSW over the next 15 years. The report also notes the broader context: within 15 years, nearly half of all homes in Sydney will be strata dwellings. This is a sector that only gets bigger.

The four options

Rather than prescribing a single path, the PEC has put four options to government:

1. Support industry to phase out insurance commissions voluntarily.
2. Prohibit strata managers from accepting any commissions.
3. Prohibit all commissions and restrict intermediary commissions further up the supply chain.
4. Prohibit percentage-based commissions but permit a regulated flat fee payment.

All four options share the same objectives: better aligning strata managers’ economic incentives with owners’ interests, enhancing transparency of remuneration, and protecting strata owners as consumers

The inclusion of Option 4, a regulated flat fee, is notable. It preserves some commission-like compensation while removing the percentage-based structure that creates the most obvious conflicts. It may prove to be the pragmatic middle ground the government lands on.

The supply chain question

One aspect of the report that’s easy to overlook is the PEC’s broader observation about the supply chain. Beyond ending strata managers’ direct commissions, the Commission considers there is a sound case to look more broadly at conflicts of interest and competition across the strata services supply chain. This suggests the review’s implications could extend well beyond insurance commissions and touch on how strata-related services are procured and priced more generally.

What’s already happened

This report doesn’t arrive in a vacuum. Since February 2025, new rules have required strata managers to disclose supplier connections, broker fees, and commissions — with penalties up to $110,000 for non-compliance. And SCA (NSW) has already moved: from 1 January 2026, members are encouraged to begin a voluntary transition away from the commission-based model toward an equivalent fee structure, phased over three years as existing management agreements are renewed.

In other words, the industry has seen this coming. The PEC’s final report is the last major piece before government decides whether (and how) to legislate.

What this means in practice

For strata owners and owners corporations, the direction of travel is positive. Greater transparency and clearer alignment between what strata managers are paid and what they deliver is good for governance and good for levy budgets.

For strata managers, the transition is real and it requires rethinking how fees are structured and communicated. Moving from a commission model to transparent, agreed fees means being able to articulate and price the value of the work — something that not all managers have had to do in the same way before.

For developers and their legal advisers, this is an important moment to review management agreement structures in existing and upcoming projects. Of the more than 400 strata management businesses estimated to operate in NSW, 37 manage a total of 5,000 or more lots each: the larger players will adapt quickly, but terms embedded in current management agreements and strata management statements may need revisiting as the regulatory landscape shifts.

Where to from here

The ball is now in the government’s court. The Minister has the report and the four options. Legislative reform (if it follows) will require careful drafting to avoid unintended consequences, particularly around the transition of existing management agreements and the treatment of commissions embedded in supply chain arrangements that strata managers don’t directly control.

We’ll be watching closely and will update clients as the government’s response takes shape.

View Final report – Strata commissions review

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.