The 10% late payment levy is mandatory in NSW unless a special resolution has been approved to forgo the penalty.
From the Strata Act
Interest and discounts on contributions
(1) Any contribution levied by an owners corporation becomes due and
payable to the owners corporation in accordance with the decision of the
owners corporation to make the levy.
(2) A contribution, if not paid at the end of one month after it becomes due
and payable, bears until paid simple interest at an annual rate of 10 per
cent or, if the regulations provide for another rate, that other rate.
(3) However, an owners corporation may by special resolution determine
(either generally or in a particular case) that a contribution is to bear no
interest.
(4) An owners corporation may, by special resolution, determine (either
generally or in a particular case) that a person may pay 10 per cent less
of a contribution levied if the person pays the contribution before the
date on which it becomes due and payable.
I suggest you tell your SM to start implementing the penalty immediately on any current unpaid levy contributions. He should be also asked to provide a list of owners whose fees are overdue.
Ensuring levy payments are received is a basic function of a SM and if they cannot do this simple task you should consider changing SM’s.
You should also get the SM to send out to all owners a letter explaining the new system. Bare in mind any owners who are owing money to the Strata are ineligible to vote until the debit is cleared.