Strata managers receiving commissions of 20 percent or more from insurance companies and kickbacks from other service providers could soon be a thing of the past, with a far-reaching inquiry announced this week.

NSW Fair Trading Minister Anoulack Chanthivong has asked the state’s Productivity and Equality Commissioner (PEC) to investigate and report back on how the insurance commissions system could be shut down.

The state government wants to end commissions and other kickbacks that they believe undermine trust in essential service providers, distort the market and create a “perverse incentive for the strata managing agent to prefer products and services that benefit themselves, instead of those that are in the best interests of owners corporations.”

Announcing the inquiry, Minister Chanthivong says he has tasked the NSW Productivity and Equality Commission to undertake a review of the market impacts of prohibiting strata managing agents from accepting commissions or other conflicted payments.

He also wants the PEC to examine the impacts this might have on strata managers who depend on commissions as well as owners who pay for them out of their premiums.

It’s a complicated problem.  Insurance cover is mandatory for all of the 87,000 strata schemes in NSW  and at the moment, strata managers only have to declare any commissions they receive.

Insurers routinely offer commissions of 20 percent or more to strata managers and brokers for bringing them clients, yet often won’t discount premiums by those amounts if strata schemes organise the insurance cover themselves.

Meanwhile, some large strata management companies don’t accept commissions at all, some filter them through their brokerage companies while many smaller firms depend on commissions as part of their business models.

At the same time, there is considerable resistance within the industry to setting guidelines for strata fees, which would give consumers a better idea of how much they should be paying.

Exposed

The whole conundrum, and the clear potential for corruption, was brought into stark relief by the Netstrata scandal exposed in the ABC TV Four Corners episode The Strata Trap  and a separate 7.30 report last year.

Those reports exposed how, following a law change forcing strata managers to declare commissions to their strata clients, some large companies were using their subsidiary brokerage companies to mask insurance commissions as service charges while adding “fees for service” to their company coffers.

“The charging of commissions in the strata industry has led to concerns about inflated costs for owners corporations, a reduction in competition, erosion of trust between owners and strata managing agents and the compromised ability of owners corporations to make informed financial decisions,” Fair Trading said in a statement at the weekend.

“The Productivity and Equality Commission will look into whether prohibiting the payment of commissions and other conflicted payments to strata managing agents will lead to better value for money, higher quality services, lower costs and simpler arrangements for strata owners.

“The potential impacts on strata managing agents’ business models will also be considered, including effects on competition.”

The Productivity and Equality Commission will consider case studies, consult with owners, stakeholders, and prepare an issues paper for public consultation before delivering its report by February 27, 2026.

Unintended consequences

“With more than 1.2 million people living in strata schemes in NSW, we need a regulatory environment that stops strata managing agents from being incentivised to act in their own interests rather than in the best interests of strata owners,” Fair Trading Minister Anoulack Chanthivong said.

“We also need to make sure any unintended consequences from a ban on commissions – particularly those that could adversely affect strata owners – are properly considered and examined.

“This Productivity and Equality Commission will review the market impacts of prohibiting strata managing agents from accepting commissions, or other payments that could improperly influence their decisions when doing their job.”

Looking at the terms of reference for the inquiry, it’s clear that the government is determined to clean up the insurance commissions system without doing more harm than good.

Strata Community Association NSW (SCA-NSW), the NSW strata managers’ professional body, has expressed qualified support for the review, saying it “presents an opportunity for further input and consultation, paving the way for increased transparency within the strata sector.”

SCA-NSW is only just recovering from the turmoil of the past year which saw Netstrata CEO Stephen Brell resign as its president in the wake of the ABC reports.

“Our sector has been aware of the government’s intention to review insurance placement remuneration practices, and we welcome the Minister’s announcement as an opportunity for further input and consultation,” said Robert Anderson, President of SCA NSW.

“We note the Minister’s comments that any unintended consequences from a move away from remuneration practices must be properly considered and examined.

“We believe any changes must be evidence-based and data-driven because of the potentially significant impacts on the financial and operational structure of the strata insurance market and the long-term sustainability of the strata sector.”

Tread carefully

In other words, tread carefully. This system may be flawed but it works… for strata managers, at least. SCA-NSW is entitled to urge caution but the terms of reference of the inquiry make it clear that everything is up for scrutiny.

“With more than 1.2 million people living in strata schemes in NSW, we need a regulatory environment that stops strata managing agents from being incentivised to act in their own interests rather than in the best interests of strata owners,” Fair Trading said.

“Strata managing agents already have a legislated fiduciary duty to act in the best interests of their clients, the owners corporation. However, it has become standard practice for many strata managing agents to receive commissions from insurers, suppliers and other service providers.

“Such commissions can create conflicts of interest and a perverse incentive for the strata managing agent to prefer products and services that benefit themselves, instead of those that are in the best interests of owners corporations. This practice breaches an agent’s fiduciary duty, and has eroded consumer confidence.”

Terms of reference

The full Terms of Reference into the review are profoundly far-reaching. It has been asked to examine the market impacts of prohibiting strata managers from accepting commissions and other conflicted remuneration or other payments that could improperly influence their decisions when doing their job.

The Review should:

1. Consider whether prohibiting the payment of commissions and other conflicted payments to strata managing agents will lead to:

• better value for money for strata owners, or
• higher quality services, or
• lower costs and simpler arrangements for strata owners, or
• any change in market conditions.

2. Assess and quantify (where possible) the costs and benefits and wider impacts of prohibiting strata managing agents from accepting commissions or other conflicted payments on:

1. strata owners,
2. strata managing agents including effects on competition and workforce availability and
3. capacity, and timeframes in which strata managing agents business models could adapt,
4. Insurers and underwriters
5. insurance brokers, and
6. the NSW Government.

3. Undertake case studies of strata managing agents whose remuneration model does not include commissions or conflicted remuneration and consider their scalability to the wider strata industry.

4. Based on findings in 1-3, identify pathways to transition away from strata commissions and other conflicted remuneration including reforms to the regulatory framework and the intersections with the Commonwealth Government’s oversight of the insurance and insurance broker industry.

5. Examine any other related matters.

In undertaking the Review, the NSW Productivity and Equality Commissioner should:

• Prepare an issues paper for public consultation.
• Assemble and analyse relevant data and draw on published research, NSW Fair Trading complaint and compliance data, expert opinion and work undertaken to date by Fair Trading, including summaries of stakeholder consultation.

The NSW Productivity and Equality Commissioner is to deliver a report with recommendations to the Minister for Better Regulation and Fair Trading and the Treasurer by 27 February, 2026.

NSW has been rolling out a series of strata law reforms this year. For more information, click HERE.