If you're choosing an agent and wondering how to set their commission, we like a tiered rate. You pay a higher rate on the part of the price above a figure you agree on, called the threshold. That way the agent earns more from every extra dollar above it.

It works best when the threshold sits at a realistic price and the agreement shows, in dollars, what you'd pay at several prices. Set the threshold too low and you can pay more than a flat rate (one percentage on the whole price) for a price you'd have got anyway.

While you compare agents, ask each one where they'd set the threshold. It's a way to test their estimate. It's worth choosing the agent on their sales record and their plan, not their rate.

On an $860,000 home, 0.2 per cent less commission saves you $1,720. An agent who gets you $20,000 less costs far more than that.

If you're wondering what's normal, the average commission across Australia is 2.01 per cent including GST, according to internal data. Rates can be as low as 1 per cent or as high as 3.5 per cent.

What is a tiered or incentive-based commission?

A tiered commission sets different rates at different prices. Usually you pay one rate up to the threshold and a higher rate on the part of the price above it. It's one form of incentive-based commission, where the agent's fee depends on how the price compares with a figure set in the agreement.

Two other forms also tie the fee to the price. With a bonus, the agent gets an extra amount if the price beats a figure you agree. With a penalty, the agent takes a lower fee if the price falls short of their estimate.

South Australia's regulator, Consumer and Business Services, lists a bonus and a penalty as terms you can negotiate. We prefer a tiered rate to a bonus. Because a bonus kicks in when the price passes a figure, a sale just over the line can leave you worse off than one just under it.

As far as we can find, no state or territory law bans tiered or bonus commission. The usual rules for commission still apply.

Why do we like tiered commission rates?

We like them for two reasons: they reward the agent for the dollars that matter most to you, and they test the agent's price estimate.

The extra dollars. On a flat rate of 2 per cent, an extra $20,000 on your sale price adds $400 to the commission.

In a 2008 US study, economists Steven Levitt and Chad Syverson found agents' own homes sold for about 3.7 per cent more than their clients' homes, and stayed on the market about 9.5 days longer.

They said this fits the idea that agents have an incentive to sell clients' homes too cheaply and too quickly. A tiered rate changes the maths: the agent gets a bigger share of the dollars above the threshold.

The estimate. Some agents quote a high estimate to win the job of selling your home, then talk the price down once you've signed. This is sometimes called "buying the listing".

If the threshold is set at the agent's own estimate, they only earn the higher rate if they beat it. An inflated estimate makes that harder to reach. So setting the threshold there is a fair way to ask an agent to stand behind their figure, though it doesn't prove the figure is right.

If you're in Victoria, the law is on your side here. Consumer Affairs Victoria says it's illegal for an agent to deliberately give you a high estimated selling price to get your business. In NSW, Fair Trading tells sellers to be cautious of estimates much higher than other agents give.

Our interest. When you sell with an agent you found through OpenAgent, the agent pays us a referral fee of 20 to 30 per cent of their commission, plus GST. A higher top rate pays us more too, so weigh our view with that in mind and run the numbers on your own price.

What we can't promise. We haven't found research, in Australia or overseas, showing that a tiered commission gets you a higher sale price. What it does change is how much the agent earns from each extra dollar. The commission data we publish doesn't separate out tiered rates, so we can't say how often sellers use them.

A tiered commission, worked in dollars

Here's one example in dollars. At $890,000, the tiered rate costs $930 more than a flat 1.9 per cent, and each extra $10,000 above the threshold adds $500 to the commission instead of $190.

The example is an illustration, not a real sale, and its rates aren't typical or recommended.

Say an agent in NSW quotes you a flat 1.9 per cent and estimates your home will sell for between $830,000 and $880,000. You propose 1.9 per cent on the first $860,000 of the price, just above the middle of that range, and 5 per cent on any amount above $860,000.

Both rates include GST, and the figures leave out marketing and your other selling costs.

Up to $860,000, you pay the same as the flat rate. Above it, you keep $9,500 of each extra $10,000. If the tiered rate is what gets you from $860,000 to $890,000, you keep $28,500 more before your other costs, even after paying $1,500 in commission on the top slice.

There's no standard top rate. To judge one, look at what each extra $10,000 adds to the commission: $190 at 1.9 per cent, and $500 at 5 per cent.

When can a tiered rate cost you more?

If the rate below the threshold matches the flat rate you were quoted, a tiered rate costs you more whenever the price passes the threshold. That's the deal, and it's fair if the agent earned it. Here are three ways it can work against you.

The threshold is too low. If your home would have sold above the threshold anyway, you pay the higher rate for nothing. NSW Fair Trading warns that a commission that changes with the price can cost significantly more than a flat rate on the final price.

The higher rate is read as applying to the whole price. Consumer Affairs Victoria points out that an agent may treat the higher rate as applying to the entire sale price, not just the part above the threshold.

A rate jumps on the whole price. Say the agreement charges 1.75 per cent if the price is under $830,000 and 1.9 per cent from $830,000, both including GST. A sale at $829,999 costs about $14,525 in commission, while a sale at $830,000 costs $15,770. One dollar more on the price leaves you about $1,244 worse off.

How do you choose the threshold?

Base it on the agent's estimate and on recent sales of homes like yours, not on the price you'd love to get. In NSW and Victoria, the agent's estimate must be reasonable, and the agent must be able to back it up. In Victoria, that means the most comparable recent sales, usually three.

An agent's estimate is often a range. The higher in the range you set the threshold, the less you risk paying the top rate for a price you'd have got anyway. But the agent also stands to gain less.

Ask each agent you interview where they'd put it, and why.

Write the threshold into the agreement as a dollar figure, not as "the estimated selling price". That matters because, in NSW and Victoria, an agent who revises their estimate can change it in the agreement without your signature.

If you're selling at auction in Victoria, your agent must publish your reserve (the lowest price you'll accept) at least seven days before the auction, for auctions from 16 October 2026. So if you set the threshold at your reserve, buyers will see it.

To check an agent's figure yourself, see what your property is worth.

What must the agency agreement say?

The agency agreement is the contract you sign with your agent, called an authority in Victoria and an appointment in some states. For a home sale, it must be in writing in every state and territory.

Everywhere except the Northern Territory, you must sign the agreement, and outside the Territory and South Australia it must also set out the commission or how it's worked out. The Territory's Act doesn't spell this out. Here's what each state and territory adds:

• NSW: a percentage must also be shown as a dollar amount, worked out on an estimated sale price. NSW Fair Trading says any change must be signed by all parties, unless it's a revised estimate.
• Victoria: a percentage must also be shown as a dollar amount on the reserve or another price set out in the authority. Consumer Affairs Victoria says GST should be set out separately.
• Queensland: the approved form asks for the commission as a percentage or dollar amount including GST. The agent can't charge more than the form states, or work commission out on more than the actual sale price.
• South Australia: the regulations ask for when the agent is entitled to commission, including whether they still get paid on a sale they didn't directly bring about, and the regulator says the agreement must state the rate or fee. Any change must be in writing, dated and signed by you and the agent.
• Western Australia: the agreement says what a percentage is worked out on, such as the sale price, and you initial the commission. The agent can't take more than you agreed in writing, or an amount that's unjust in the circumstances.
• Tasmania: the written appointment shows how the fee is worked out.
• ACT: a percentage must also be shown as a dollar amount on a stated estimated sale price.
• Northern Territory: the agreement must be in writing.

In NSW, Victoria and the ACT, the law asks for a dollar figure at one price. Ask the agent to show what you'd pay at several, as Consumer Affairs Victoria suggests. For the rest of the agreement, see how to structure an agent agreement.

How to ask for a tiered commission

1. Compare agents on their recent sales and their plan for your home.
2. Ask each for their flat rate, and whether it includes GST. A rate of 2.2 per cent including GST is 2 per cent plus GST.
3. Ask where they'd set a threshold and what they'd charge above it. For how far the rate itself can move, see whether agent fees are negotiable.
4. Ask for a table of what you'd pay at three or four realistic prices, including one below the threshold and one well above it.
5. Check the agreement says which part of the price each rate applies to, and that no rate jumps on the whole price.

If an agent won't agree to a tiered rate, that's worth weighing as you compare them, alongside their sales record. If you'd rather pay a set amount whatever the price, see how fixed-fee real estate works.

For average rates where you live, see our guide to real estate agent fees, or work out a flat-rate fee with the commissions calculator.

Where these figures come from

The average commission and its range are from OpenAgent's internal data on 14,042 commissions between 1 January 2025 and 1 October 2026.

The state and territory rules come from each one's agency law, approved forms and regulators' guidance, which we read in October 2026. The research on agents' own homes is Levitt and Syverson's study in the Review of Economics and Statistics (2008). The worked example is our own calculation.