The Challenges of insolvency in the NDIS Sector
Over the past 18 months, we’ve had direct experience acting as administrators and liquidators of NDIS providers. These engagements have highlighted both the importance of the scheme and the structural challenges faced by service providers operating within it.
The Economics of the Scheme
The NDIS is an ambitious and necessary program, designed to give participants access to vital supports and services. Yet the economic model underpinning the scheme has created real tension for providers. Pricing structures can be rigid, margins are thin, and the administrative burden is high. Many providers struggle to remain viable while still delivering the quality-of-care participants expect.
These pressures have been compounded by a highly competitive environment, where the promise of NDIS funding attracted a flood of new entrants during the program’s early, largely “unregulated” years. While some operators have thrived, many others now face financial strain as costs outpace funding, compliance obligations expand, and participant expectations grow.
Understanding the Role of Providers
A common misconception is that NDIS providers are akin to medical professionals. In reality, providers act as coordinators and facilitators. They help participants access and organise their prescribed care, rather than being doctors or clinical specialists themselves. This distinction is often lost, but it is central to understanding how providers operate - and why their business models are so fragile.
Workforce Challenges
Another recurring issue is workforce quality and sustainability. Many NDIS workers come from diverse backgrounds, and for some, English is not their first language. Their support notes and written records may not always meet the highest administrative standard. However, this should not be mistaken for a lack of quality care. These workers deliver compassionate, personalised, and life-changing assistance to participants. The challenge lies in reconciling this reality with the heavy reporting and compliance requirements imposed by the scheme.
The Impact of Early Unregulated Growth
The early years of the NDIS were marked by rapid, and often unregulated, growth as can be seen from the cost of the scheme for the Australian tax payer. This enabled many passionate and capable providers to establish themselves quickly, but as the scheme has matured and the Federal Government has tightened controls, some of the very providers who set out to deliver quality services are struggling to adapt.
In our role as an insolvency practitioners, we see the consequences first-hand: providers with well-earned reputations and dedicated staff finding themselves overwhelmed by cash-flow pressures, compliance costs, and funding mismatches. The human impact of these failures is significant - not only for the providers, their employees and contractors but most importantly for participants who rely on continuity of care.
The Need for Better Engagement with Practitioners
One of the most pressing challenges is communication with the NDIA, the funding and financial arm of the NDIS. When a provider enters administration or liquidation, the priority must be to ensure funding continues to allow us to look at all available options to restructure the business with the ultimate aim in ensuring participants receive continued care. Yet in practice, insolvency practitioners often find themselves limited to email channels, with long delays and little scope for constructive dialogue.
In some cases, practitioners are left with little option, but to escalate matters outside the NDIA – including to the Federal Minister’s office - simply to obtain engagement and secure dialogue. This is neither efficient nor sustainable. The NDIA should develop a clear framework for engagement with administrators and liquidators, opening clear lines of communication and practical guidance on how insolvency related issues will be managed. This kind of structure is typical in other regulated sectors; for example, workout and restructuring teams within major banks assign a direct liaison to each matter.
Looking Ahead
The NDIS is here to stay, and its mission is too important to be undermined by structural inefficiencies. However, the current system requires continued reform to ensure that good providers are not driven out of the market by economic pressures they cannot control. Policymakers, regulators, and practitioners must work together to strike a balance: one that ensures accountability and quality without suffocating providers under financial and administrative burdens.
For insolvency professionals, this sector will likely remain a challenging and important area of work. As administrators and liquidators, our role is not only to manage the financial wind-up of distressed providers but also to safeguard participants wherever possible and highlight the systemic issues that lead to these failures.
