Most wars are lost long before the white flag is raised. So it is with the war on strata insurance commissions. The NSW Productivity Commission’s report released this week heralds the raising of the white flag. The truth, though, is that the strata managers of old lost the war some time ago. An opaque and conflicted payment model was always a time-limited option for an occupation crying out to become a profession.
The report recommends prohibiting strata managers from accepting commissions. It also calls for restricting intermediary commissions across the supply chain, to be phased in over three years. As the Commission itself concluded: “Transparency cannot cure misaligned incentives; only the removal of conflicted remuneration can.” That sentence ends a long debate that has raged through the ACCC’s 2020 Northern Australia inquiry, the Trowbridge review, ABC’s Four Corners, and Professor Johnston’s “At the Crossroads” research. The arguments have been exhausted. The verdict is in.
Read: At the Crossroads: The End of Hidden Commissions in Strata Management
Read: The Four Corners Catalyst
Hasn’t the Market Already Moved On?
As I wrote last week in my analysis of the Macquarie Bank 2026 Strata Industry Benchmarking Report, the shift is already well underway. Twenty-four percent of strata management businesses now charge an insurance fee rather than receiving income from insurance commissions. A further 23% use some form of all-inclusive flat fee model. The Macquarie report noted these firms “may be seeing benefits from embedding further, more overt professionalism, accountability and trust in their client relationships.”
Read: One in Four Strata Firms Now Charge a Transparent Insurance Fee. What About Yours?
The Productivity Commission’s own data tells the same story. Twelve per cent of managers surveyed had phased out or were phasing out commissions. Another 6% plan to follow within three years. The direction of travel has been clear for anyone willing to look. Relying on commissions to subsidise artificially low management fees was always unsustainable. The legislation will simply formalise what the better operators already knew.
So What’s the Real Story in This Report?
The most important part of this report is not the commission ban. It is the spotlight the Commission has placed on related party transactions and vertical integration. This is the next frontier for the professionalisation of strata management.
Read: How Strata Managers Can Finally Gain Professional Respect
The report found that vertically integrated business models – where strata management firms also own or are connected to insurance brokerages, maintenance companies, fire safety firms, debt collection agencies, and other suppliers – are becoming more common in the industry. Johnston’s research found that 46% of management agreements disclosed a relationship with an associated entity. These ranged from maintenance and plumbing through to insurance broking, remedial work, legal services, valuations, fire protection, and energy brokering. The Productivity Commission warns these arrangements create “commission-like incentives” even where no explicit commission is paid.
Critically, the report identifies that banning commissions alone could actually make this problem worse. The Commission warns that the reform “may also encourage some providers to vertically integrate into related services, so that they can either continue to receive commissions, as a broker instead, or benefit from referring schemes from their strata management business to the connected supplier.”
What Are Owners Saying About Related Party Deals?
The evidence from owners is damning. The report is filled with accounts of strata managers directing work to connected entities at inflated prices. They hide these relationships in fine print, and profit from arrangements that are incompatible with their fiduciary duty.
For example, one owner reports:
“A simple repair was quoted by a very large maintenance company based on the other side of Sydney. It turned out this company was part of the conglomerate that includes our ‘new’ strata management company… They became quite belligerent when the committee insisted on a local, independent repair person (who quoted and did the work for a fraction of the cost).”
Even some within the industry acknowledged the game. One service provider told the Commission: “There is a strong likelihood that strata managers and brokers will adapt quickly by shifting benefits into related-party arrangements, re-labelling payments, or embedding financial incentives in parts of the supply chain that are not directly covered by the proposed reforms.”
And from an industry insider: “Joint venture agreements… have been created for the sole purpose of managers getting around their disclosure agreements and requirements.”
Why Should the Larger Firms Be Worried?
The report has put related party transactions squarely on the regulatory agenda. Recommendation 3 calls for the government to evaluate the 2025 disclosure changes targeting connected suppliers by 2028. And if those changes have not worked, it should consider additional measures.
Read: A New Law to Make a Messy Situation About Insurance Commissions Even Messier
The lesson from British Columbia is a flashing warning light. In 2020, when that province banned referral fees, some managers simply set up their own licensed insurance agencies to circumvent the ban. Within three years, regulators had to step in again. They banned brokers from doing insurance business with related strata managers altogether. In 2025, the ban was upheld by the Supreme Court after a legal challenge.
NSW has been warned. The Productivity Commission is watching. And the larger firms that have built their growth strategies around acquiring connected service businesses – brokerages, maintenance arms, building management subsidiaries – must ask themselves a hard question: can these arrangements survive the scrutiny that is coming?
What Smart Operators Will Do Now
The smartest operators in this industry are already ahead of this curve. They are building trust through transparent pricing, independent procurement, and genuine service quality. They know that, in a sector where almost half of all Sydney homes will be strata-titled by 2041, trust is not a nice-to-have; it is the product.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
