Insurance Commissions & Disbursements: The Fees Your Strata Manager Hopes You Won't Question

Insurance Commissions & Disbursements: The Fees Your Strata Manager Hopes You Won't Question

A deep dive into Schedule C and Schedule D — the commission structures and disbursement charges that inflate your real strata costs

Most Australian apartment owners focus on two numbers when evaluating their strata management: the quarterly levy and the annual management fee.

But there are two additional cost layers buried in your management contract that can collectively add tens of thousands of dollars to what your building truly pays — and they're the fees your strata manager is least likely to bring up voluntarily.

They're found in Schedule C (commissions and financial benefits) and Schedule D (disbursements).

Part 1: Schedule C — The Commission Question

Schedule C of the standard SCA strata management agreement requires the strata manager to disclose any commissions, rebates, kickbacks, or financial benefits they receive from third-party service providers.

In practice, the most significant item disclosed here is the insurance commission.

How Insurance Commissions Actually Work

The mechanics of strata insurance commissions in Australia follow a chain:

1. Your owners corporation pays the full insurance premium
2. The insurer pays a commission to the insurance broker — typically around 20% of the base premium
3. The broker shares a portion of that commission with the strata manager as a referral fee
4. In some cases, the strata manager deals directly with the underwriter and receives the full commission

Despite what some strata managers claim, the owners corporation ultimately bears this cost. The commission is baked into the premium you pay. If you were to go directly to an insurer or use an independent broker without a commission-sharing arrangement, your premium would likely be lower by the amount of the commission.

The Numbers Are Staggering

For larger buildings with high insurance premiums, the commission alone can exceed the base management fee. A building paying $150,000 in annual insurance might be funnelling $30,000 to its strata manager through the insurance commission chain — on top of a management fee that might only be $25,000.

That means more money flows to the manager through the insurance commission than through the fee you actually negotiated.

The Three Commission Options in Your Contract

The standard SCA agreement provides three ways to handle commissions:

Option 1 — Manager keeps everything The manager retains 100% of all commissions from suppliers. This is the default in most contracts and the most expensive option for owners.

Option 2 — Split arrangement The manager retains some commissions and passes the remainder to the owners corporation. The split ratio is negotiable but rarely favourable to owners unless specifically contested.

Option 3 — Full pass-through All commissions are passed through to the owners corporation within 30 days. The manager receives zero commission income and is compensated solely through the agreed management fee.

Why Commissions Create Conflicts of Interest

The problem with insurance commissions isn't just cost — it's conflicted incentives.

When your strata manager earns a percentage of your insurance premium, they have a financial incentive to:

• Recommend higher-premium policies (bigger commission)
• Use brokers who offer larger commission splits
• Discourage the committee from shopping around independently
• Resist switching to cheaper insurers who don't pay commissions

This doesn't mean your strata manager is acting in bad faith. But the incentive structure makes it impossible to know whether the insurance recommendation you're receiving is truly the best deal for your building or the best deal for your manager's income.

As the Owners Corporation Network puts it: "Commissions are about one thing — concealing income to mislead you, the clients, who are paying these commissions."

The Reform Landscape

Insurance commissions in strata have come under intense national scrutiny:

• The ABC's "Strata Trap" investigation brought widespread attention to how conflicted remuneration distorts the insurance market for apartment owners
• SCA NSW resolved to phase out insurance commissions for its member agents — a significant industry shift, though voluntary and still evolving
• The Strata Managing Agents Legislation Amendment Act 2024 (NSW) strengthened disclosure obligations around commissions and financial remuneration
• The NSW Productivity and Competition Commissions are currently investigating conflicted strata remuneration more broadly, with public submissions expected

However, commissions themselves remain legal. Disclosure is required, but the practice is not banned. For owners, the message is clear: you have the right to know exactly how much your strata manager earns from your building's insurance, and you have every right to negotiate alternatives.

What You Can Do About Commissions

1. Request Option 3 (full pass-through) in your next contract negotiation
2. Ask for the commission amount to be explicitly stated on the front page of any management proposal
3. Get independent insurance quotes through a broker who doesn't share commissions with your manager
4. Compare the "total cost of management" including commissions, not just the base fee
5. Check clause 3.3(d) — ensure you're not locked into paying phantom commissions if you arrange your own insurance
6. Support industry reform — the more owners demand commission-free arrangements, the faster the market will shift

Part 2: Schedule D — Death by a Thousand Disbursements

If Schedule C is the big hidden cost, Schedule D is the slow leak. Disbursements are the out-of-pocket administrative expenses your strata manager charges back to the building. Individually they look trivial. Collectively, they can add $3,000 to $10,000+ per year depending on building size.

Common Disbursement Charges

Disbursements typically include:

• Postage and courier costs
• Photocopying and printing
• Phone calls
• Stationery and envelopes
• Bank fees and transaction charges
• Document storage and archiving
• Preparing reconciliation statements
• Software platform fees
• Strata Hub government charges (NSW — $3 per lot)

Some contracts also include a "fixed disbursement allowance" — a flat monthly charge per lot that covers all administrative overheads in one lump sum.

The Per-Lot Trap

The fixed disbursement allowance is where many buildings get caught. The charge looks negligible on paper, but it scales dramatically with building size:

A $10 per lot per month disbursement charge in a 200-lot building is $24,000 per year in disbursements alone. That's often more than the base management fee for a building half that size.

Fixed vs Variable: Which Is Better for Your Building?

The choice between fixed and variable disbursements depends on how your building communicates:

Choose variable if:

• Your building uses email for levy notices and correspondence
• Meeting documents are distributed electronically
• You have an online owner portal
• Minimal physical mail is sent

Choose fixed if:

• Your building still posts levy notices
• Meeting agendas are printed and mailed
• Many owners don't use email
• You want budget predictability regardless of volume

The trend across Australian strata is firmly toward digital. If your strata manager is still charging significant disbursements for printing and postage, it's worth asking why they haven't moved to more efficient digital processes — and whether those legacy costs are being passed on to your building unnecessarily.

New Disbursement Charges to Watch

Several new disbursement categories have emerged in recent years:

Strata Hub (NSW) Beyond the government's $3 per lot charge, many managers charge their own fee for the data entry and compliance work. Some bill this at senior manager hourly rates — $200–$500 per year for what amounts to a data entry task.

Cybersecurity compliance As strata data moves online, some managers are passing on platform security costs as disbursements.

Electronic archiving fees Cloud storage and document management platform fees are increasingly appearing as disbursement line items.

Contractor compliance verification Checking ABNs, licences, and insurance for contractors working on common property — sometimes charged per contractor, per engagement.

Updated fire safety compliance Administrative costs associated with the evolving fire safety regulatory framework, particularly for buildings with combustible cladding.

Bringing It All Together: Your True Cost of Management

To understand what your building truly pays for strata management, you need to add up every layer:

In this example, the headline management fee is $22,000 — but the true cost is double that. The insurance commission alone represents more than half of the base fee.

This is why comparing strata managers on headline price alone is so misleading. The buildings that get the best value are the ones that understand every schedule, negotiate every fee, and hold their manager accountable for transparent reporting.

Your Transparency Checklist

Before your next AGM or contract renewal, make sure you can answer these questions:

• What is our total Schedule B spend for the past 12 months?
• What insurance commission does our manager receive, and under which option?
• What is our total annual disbursement cost, including any per-lot charges?
• What is the annual fee escalation rate, and is it pegged to CPI?
• Have we compared the "total cost of management" (not just the base fee) against at least two other providers?
• Does our contract require committee approval before Schedule B work is performed?
• Have we requested an all-inclusive quote for comparison?

If you can't answer all of these, your building is likely paying more than it needs to — and more than it knows.

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