TL;DR: To curb the costs of the $50 billion annual NDIS, the federal government has passed laws targeting $37 billion in savings over four years and $150 billion over a decade. By restricting access to those with permanent and profound impairments and introducing progressive reassessments from January 1, 2028, the reforms will affect approximately 240,000 participants. While a co-funded $10 billion foundational support fund has been established with states, disability advocacy groups warn that the changes will remove 94 million hours of paid care, creating significant financial and support gaps.
The Financial Imperative Behind the Reforms
The National Disability Insurance Scheme (NDIS) has reached an annual cost of $50 billion, prompting the federal government to implement structural funding reforms to ensure its long-term financial sustainability. The newly passed legislation represents a major fiscal intervention, with the government projecting budget savings of $37 billion—and up to nearly $38 billion according to some estimates—over the next four years. Over the next decade, the cumulative savings are expected to reach $150 billion.
NDIS Minister Jenny McAllister emphasized that these measures are essential to secure the 'social licence' and integrity of the program. McAllister explained that the NDIS was designed specifically for people with permanent and significant disabilities. Currently, out of 5.5 million Australians living with a disability, only 670,000 to 680,000 receive NDIS support. The government maintains that narrowing the scheme’s focus to its original target population is necessary to protect public funding and guarantee long-term viability.
The Shift to Functional Assessments and Eligibility Restrictions
The primary mechanism for achieving these multi-billion-dollar savings is a tightening of eligibility criteria. Starting January 1, 2028, access to the NDIS will be determined by functional capacity assessments rather than diagnostic labels. This change will restrict entry to those with permanent and profound impairments.
Under this new model, approximately 240,000 people are expected to either be removed from the scheme or prevented from accessing it in the future. Existing participants will face progressive reassessments of their functional capacity. The government plans to transition individuals with lower-needs diagnoses, such as mild-to-moderate autism or developmental delays, off the scheme and into alternative state-run services.
Co-Funding Foundational Support: The $10 Billion Agreement
To offset the impact of these changes, the federal government has negotiated with state and territory governments to establish a $10 billion investment in 'foundational supports' outside the NDIS. This funding will support alternative services co-funded by the Commonwealth and the states.
The first phase of this rollout is the 'Thriving Kids' program, scheduled to start in October 2026. This initiative is designed for children aged eight and under (under the age of nine) who have developmental delays or autism with low to moderate support needs. Bilateral agreements have been signed by all states except Queensland, which has yet to submit its implementation plans despite the Premier signing the initial agreement earlier this year.
For older children, teenagers, and adults who do not meet the stricter 2028 NDIS criteria, the government has proposed a 'Thriving Teens' program. Health and Disability Minister Mark Butler noted that these systems must be designed and operational within the next 16 months to prevent participants from falling between support structures as the NDIS transition begins.
Advocacy Concerns and the Care Gap
Disability advocates have raised serious concerns regarding the financial and support implications of these cuts. People with Disability Australia (PWDA) warned that the reforms represent a devastating reduction in support for the disability community.
Megan Spindler-Smith, PWDA's acting chief executive, pointed out that the changes will remove 94 million hours of paid care from participants' lives. PWDA has expressed strong scepticism about whether the $10 billion foundational support fund can replace this lost care, particularly given that state and territory governments have explicitly stated that their alternative programs will not provide like-for-like supports. PWDA's interim president, Jarrod Sandell-Hay, warned that many participants will be forced to exit the scheme without a reliable safety net, which could lead to severe outcomes for vulnerable individuals.
Key Takeaways
- Savings Targets: The reforms aim to save $37 billion (up to nearly $38 billion) over four years and $150 billion over ten years.
- Scheme Budget: The legislative changes target the NDIS's escalating $50 billion annual cost to secure its long-term viability.
- Participant Impact: Approximately 240,000 individuals will be removed from the scheme or denied access under tighter eligibility criteria.
- Functional Assessments: From January 1, 2028, eligibility will be determined by functional capacity assessments, with existing participants reassessed progressively.
- Foundational Support Fund: A $10 billion fund co-funded with states will establish alternative supports, beginning with 'Thriving Kids' in October 2026.
- Care Hours Removed: Advocates warn that the transition will result in the loss of 94 million hours of paid care, with no guarantee of equivalent replacement support.
