NDIS fully financed until 2019-20

Despite the predicted $22 billion annual cost of the NDIS once fully rolled out, the analysis shows the scheme will be covered by the 0.5% Medicare Levy increase, agreements with the States and Territories, and savings in other Commonwealth programs until 2019-20. At this time, the Commonwealth will be required to input approximately $2 billion and around $4 billion each subsequent year.

Professor Richard Madden, who carried out the analysis, said transparency in reporting of the NDIS financial arrangements is crucial to the scheme’s success.

"The NDIS should be viewed as a major social reform at a modest cost given there is no net impact on the Commonwealth budget until three years after the full roll-out begins, and annual expenditure is substantially offset by the increased Medicare Levy and savings in other programs."

"However, the limited and fragmented information being released to date means the community, potential NDIS participants, and their families and carers are not being given the opportunity for informed discussion."

"This is a revolutionary social policy initiative and these financial arrangements, coupled with bi-partisan support, are the two pillars on which it stands."

NDIS financing explained

DisabilityCare Australia Levy

• On 1 July 2014 the Medicare Levy was increased by 0.5% to fund the DisabilityCare Australia levy to go towards financing the NDIS.
• NDIS expenditure up to 2016-17 is well below the Commonwealth’s share of the DisabilityCare Australia Levy.
• The NDIS full roll out begins on 1 July 2016; up to 2017-18, levy proceeds accumulate and surpluses are invested for use as expenditure grows.
• The surpluses decrease in 2017-18 and 2018-19, and will be fully used during 2019-20 when the net financial impact on the Commonwealth will be approximately $2 billion.

Funding post 2019-20

• Once fully operational, the NDIS is predicted to cost $22 billion annually, with States and Territories meeting half of the costs.
• After taking into account ongoing contributions to the DisabilityCare Australia Levy and other savings from existing Commonwealth funded programs, the net financial impact on the Commonwealth is estimated to be $4,073 million annually, equivalent to 37% of the Commonwealth’s share of $11billion in annual NDIS expenses. 

Professor Madden said the paper relied on drawing information from various sources and making informed assumptions to build up complete financial estimates.

“To allow us to learn and plan, it is vital that future Commonwealth budgets include a comprehensive and transparent explanation of the financial arrangements for the NDIS,” said Professor Madden.

“We should also consider that in the long-term the NDIS will enable more people with disabilities and their carers to join the workforce, further offsetting costs and having a positive economic impact.”

Professor Richard Madden is a stream leader in the Centre for Disability Research and Policy, University of Sydney and Chair of the House with No Steps. He is a former Director of the Australian Institute of Health and Welfare and was Australian Actuary of the Year in 2002.

The full policy paper can be viewed on the Centre for Disability Research and Policy website.