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Social Policy Section
This paper was updated in March 2017 – see The National Disability Insurance Scheme: a quick guide.
What is the National
Disability Insurance Scheme (NDIS)?
Disability Insurance Scheme (NDIS) provides support to people with
disability, their families and carers. It is jointly governed and
funded by the Australian and participating states and territory governments. The
NDIS is being introduced across Australia from July 2016, except
in Western Australia where it is still being trialled.
The main component of the NDIS is individualised packages of
support to eligible people with disability. When the NDIS is fully implemented in
2019, it is expected that around 460,000 Australians will receive individualised
The NDIS also has a broader role in helping people with
- access mainstream services, such as health,
housing and education
- access community services, such as sports clubs
and libraries and
- maintain informal supports, such as family and
The NDIS is not means tested. Like many other Australian
Government social policy programs—such as Medicare, the Pharmaceutical Benefits
Scheme and income support payments—the NDIS is an uncapped (demand-driven)
Objectives and principles of the
The NDIS was established under the National
Disability Insurance Scheme Act 2013 (NDIS Act). The NDIS Rules are
legislative instruments made under the NDIS Act which set out the
operational details of the NDIS.
The NDIS Act also established the National
Disability Insurance Agency (NDIA), the independent statutory agency
responsible for administering the NDIS.
Objectives of the scheme outlined in the NDIS Act
- supporting the independence and social and economic participation
of people with disability
reasonable and necessary supports, including early intervention supports, for
- enabling people with disability to exercise choice and control in
the pursuit of their goals and the planning and delivery of their supports
- facilitating the development of a nationally consistent approach
to the access to, and the planning and funding of, supports for people with
- promoting the provision of high quality and innovative supports
to people with disability.
is underpinned by an ‘insurance-based approach, informed by actuarial analysis,
to the provision and funding of supports for people with disability’ (explained
in more detail below). The NDIS Act also specifies that, in implementing
the NDIS, regard must be had to ensuring its financial stability.
What is the NDIS replacing?
The NDIS will largely replace the existing
system of disability care and support provided under the National Disability Agreement (NDA). Currently,
the Australian Government has responsibility for providing employment
services for people with disability and funding for states and territories to
assist with meeting the objectives of the NDA. State and
territory governments are responsible for specialist disability services, such
as accommodation support, respite care, community support, community access,
and advocacy and information for people with disability.
According to the Productivity Commission’s Report
on Government Services 2016, 29.7 per cent of
the $8.0 billion spent on specialist disability services in 2014–15 came from the Australian Government, and 70.3 per cent came
from the states and territories.
In 2011, the Productivity Commission recommended
that Australia replace the existing system with a unified national scheme to
fund long-term, high-quality care and support for all Australians who
experience significant disability (to be known as the NDIS). It described the
existing system as ‘underfunded, unfair, fragmented, and inefficient’, arguing
that it gave people with a disability ‘little choice and no certainty of access
to appropriate supports’.
Following the release of the Productivity Commission’s report,
the Gillard Government began working with the states and territories to
establish the foundations of the NDIS. The NDIS commenced on 1 July 2013,
beginning with a trial phase known as the NDIS Launch.
What is meant by ‘insurance
What is an insurance-based approach and how is it intended
to differ from current arrangements?
to Bruce Bonyhady, Chairman of the NDIA, the insurance approach can be
contrasted with the current ‘welfare approach’ to disability services,
according to which ‘Governments plan for expenditures over a 12-month period to
– at most – a five-year time frame [and] [a]s a consequence, the funds
available for disability can change – depending on the economy, tax revenues
and the requirements of other portfolios’. In contrast, under an insurance
approach, ‘expenditure is factored in over the life of an individual – and
scheme sustainability is measured by calculating the total future costs of all
those who are insured’. This, argues Bonyhady, creates an incentive to make
short-term investments in participants aimed at increasing their independence
and participation in the community and the workforce in the hope of reducing
According to Bonyhady, a focus on reducing long-term costs
also means that insurance schemes have an incentive to monitor gaps between
forecasts and outcomes, as well as the benefits of the scheme for participants.
Who may access individualised
To be eligible to receive individualised supports under the
NDIS a person must meet certain access
requirements. These include
that the person must:
for access to NDIS individualised supports are made to the NDIA. Those
found eligible are known as NDIS ‘participants’ and usually
remain eligible for life.
What individualised supports are
Supports may be funded in areas such as education,
employment, social participation, independence, living arrangements and health
and wellbeing. They may include funding for:
- daily personal activities
- transport to enable participation in community, social, economic
and daily life activities
- workplace help to allow a participant to successfully get or keep
employment in the open or supported labour market
- therapeutic supports including behaviour support
- help with household tasks to allow the participant to maintain
their home environment
- help by skilled personnel in arranging aids or equipment
assessment, set up and training
- home modification design and construction
- mobility equipment and
- vehicle modifications.
The NDIS website provides more detailed examples of the kinds of supports that
might be provided to participants.
NDIS participants meet with the NDIA to identify a set of
supports agreed as ‘reasonable
and necessary’ to meet their goals. These are then included in their ‘NDIS
plan’. Under the objects and principles of the NDIS Act, participants are entitled to
exercise ‘choice and control in the pursuit of their goals and the planning and
delivery of their supports’. Funds provided under an NDIS plan may be managed
by the participant, the NDIA, a registered plan management provider or a
nominee of the participant. Supports are provided by registered
providers in what the NDIA envisages will be a competitive,
How much will the NDIS cost?
The cost of the NDIS will increase
substantially over the next four years while it is progressively
introduced: from around $4.2 billion in 2016–17 to $21.6 billion in
2019–20. It is important to note, however, that the Australian Government will
only be responsible for just over half ($11.2 billion) of the annual cost of
When fully introduced, the NDIS will represent a substantial
new government program. As can be seen in the figure below, the estimated
annual cost will not be much more than the amount projected to be spent by the Australian
Government on aged care or the Disability Support Pension (DSP), more than the
current annual cost of the Pharmaceutical Benefits Scheme (PBS), and not
substantially less than the current annual cost of Medicare.
Figure: Projected NDIS expenditure compared with selected
Australian Government programs (2019–20)
Source: Australian Government, Portfolio Budget Statements, (various), 2016–17, accessed 1 September 2016.
The most recent NDIA
annual report projects that expenditure will increase gradually to
1.3 per cent of GDP in 2044–45, reflecting the increased cost of
supports as NDIS participants age over time.
However, the Productivity Commission argues that while the
NDIS will be a cost to government it will not be a cost to the economy. In its
recommending the introduction of the NDIS, it suggested that the benefits of
the NDIS would outweigh the costs and add almost 1.0 per cent to
How is the NDIS being funded?
Funding for disability has long been the subject of debates about
cost and blame shifting between the Australian Government and the states and
territories. Guaranteed future funding for disability services was part of the
rationale for the NDIS.
The Productivity Commission noted
that ‘current funding for disability is subject to the vagaries of governments’
budget cycles’ and proposed that the Australian Government should finance the
entire costs of the scheme from general revenue, or a levy ‘hypothecated to the
full revenue needs of the NDIS’.
The method of financing agreed between the Gillard
Government and state and territory governments is different to the two main
approaches proposed by the Productivity Commission. Participating governments jointly
provide funding based on intergovernmental
agreements, with funding coming from a combination of sources.
First, existing money spent by the Australian and state and
territory governments on disability services is being redirected to the NDIS.
In addition, funds for the NDIS are taken from the July
2014 increase to the Medicare levy (from 1.5 per cent to 2.0 per cent
of taxable income). Revenue raised from increasing the Medicare levy is
directed to a special fund—the DisabilityCare
Australia Fund—for the purpose of reimbursing governments for NDIS
expenditure. In contrast to the Productivity Commission model, the increased
Medicare levy is not designed to meet the full revenue needs of the scheme
(just as the levy only partially covers the annual cost of Medicare).
Finally, any NDIS funding not offset by the above sources
must come from general budget revenue or borrowings.
Funding from 2019
The Australian Government’s share of NDIS expenditure in
2019 is expected
to be around $11.2 billion. The Government
estimates that around $6.8 billion of this expenditure will come from
the redirection of existing disability funding and the Australian Government’s share
of the DisabilityCare Australia Fund, leaving $4.4 billion to be sourced
The Government has proposed
that this additional amount should come from budget savings directed to a
special account—the NDIS Savings Fund—which will ‘hold NDIS
underspends, and selected saves from across the Government’. While savings may
come from any portfolio, all savings proposed
so far have been from the social services portfolio. Legislation
to establish the NDIS Savings Fund lapsed with the dissolution of the 44th Parliament.
To the extent that it cannot be funded from these sources,
the Australian Government’s contribution will be a cost to the Budget—as are
most other government programs that do not have dedicated funding sources.
of the NDIS is shared between participating governments. The main governance
- the NDIS is administered by the NDIA and is governed by a Board
- decisions on NDIS policy are made by the Standing Council on
Disability Reform, which is a Council
of Australian Governments (COAG) ministerial council
- the NDIA holds NDIS funds contributed by participating
governments in a single pool, manages these funds, administers access to the NDIS
and approves the payment of individualised packages
- the NDIS Board is responsible for the performance and strategic
direction of the NDIA
- the NDIA Board is advised by the
NDIS’s Independent Advisory Council and
- the Australian Government Minister for Social Services administers
the NDIS Act, and has the power to make the NDIS Rules and give
direction to the NDIA (with the agreement of the states and territories).
Challenges and questions
The NDIS has raised expectations of a transformation in the
provision of support to people with disability, but it will face a range of
challenges as it is introduced in coming years. Questions include:
much ‘choice and control’ will be available to NDIS participants and what
will ‘reasonable and necessary supports’ mean in practice?
- How will disability service providers adjust
to the new market-based system?
- Will there be sufficient service
providers and disability
care workers to meet demand?
- How will the interaction between the NDIS and mainstream supports,
such as the health
system, be managed?
- How will the NDIS ensure equitable access to supports for Indigenous
- How will risks
to the financial sustainability of the NDIS be managed? Policy
options would most likely include tighter interpretation of access
requirements and concepts such as ‘reasonable and necessary supports’.
- How might disagreements
between participating governments on decisions relating to the NDIS be
- Will the shared funding model blur responsibility for funding the
NDIS, and hence risk
the funding certainty the NDIS was intended to provide?
- Buckmaster L and Tomaras J, National
Disability Insurance Scheme Bill 2012, Bills digest, 72, 2012–13,
Parliamentary Library, Canberra, 2013.
- Joint Standing Committee on the National Disability Insurance
Scheme (JSCNDIS), ‘Reports’,
- National Commission of Audit, ‘The National Disability
Insurance Scheme’, in Towards
responsible government: the report of the
National Commission of Audit: phase one, February 2014, pp. 90–4.
- NDIS, ‘Fact
sheets and publications’, ‘Quarterly
reports’, and ‘Annual
reports’, NDIS website.
- Whalan J, Acton P and Harmer J, A review of the
capabilities of the National Disability Insurance Agency, NDIA, January 2014.
- Productivity Commission, Disability
care and support, Report, 54,
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