The federal government has announced some of the toughest penalties in the history of the National Disability Insurance Scheme, including maximum fines of up to $16.5 million and the introduction of jail time for serious breaches. Yet despite the size of these new punishments, a troubling truth remains. The vast majority of providers delivering services under the NDIS are not registered, not monitored and not accountable to the regulator.
At last count, there were more than 273,000 providers operating within the scheme. About 94 per cent of them are unregistered. This unregulated shadow market has become one of the most significant weaknesses in the entire system, raising questions about how meaningful any crackdown can be when most of the sector sits outside formal oversight.
Under the proposed changes, providers who commit aggravated breaches that lead to serious injury or death could face the maximum $16.5 million fine. Operating without registration when registration is mandatory will attract criminal penalties, with the worst cases carrying two years of jail time. Failing to comply with a banning order could lead to five years behind bars.
These reforms signal that the government is serious about addressing fraud, violence, neglect and the misuse of participant funds. Officials argue that the penalties bring consequences closer to what would be expected in other care sectors, particularly when a participant dies due to negligence or systemic failure.
However, penalties only work when the regulator has visibility over the people and businesses delivering services. The NDIS Quality and Safeguards Commission oversees registered providers, but unregistered operators are effectively invisible until something goes wrong. Many of these businesses work entirely outside the formal safeguards that were designed to protect vulnerable participants.
The reliance on unregistered operators has grown partly because of the design of the scheme itself. Participants can choose to self-manage or use plan managers, and in doing so they often select support workers and services that are not registered. Many families prefer unregistered providers because they are cheaper, more flexible or easier to secure in areas with workforce shortages.
But the trade-off is reduced oversight. Unregistered providers are not required to meet the standards, training requirements, reporting obligations or risk settings that apply to registered businesses. They are also not subject to the same complaints investigation processes, which means issues may go undetected until harm has already occurred.
For participants with complex needs, this gap creates a serious safety risk. The government has acknowledged that where fraud exists, violence and abuse often follow. Yet the scheme continues to rely on a market where providers can operate freely without any real scrutiny.
The cost of the NDIS is rising faster than the government can rein it in. Integrity measures are intended to bring growth under control, but experts warn that unless the unregistered market is addressed, financial reform will struggle to take hold. Some of the worst rorting, including false claims, holiday packages disguised as supports and inflated invoices, has taken place in the unregistered sector.
While the new legislation gives the commissioner the power to remove misleading advertisements and pursue criminal penalties, the core challenge remains unchanged. The regulator cannot police what it cannot see.
Former NDIS board members and disability sector leaders argue that a tougher approach to registration is essential. They say the high number of unregistered operators reflects a system that has allowed too many loopholes to develop. There are growing calls for transitional pathways that bring more providers within the registered framework, along with additional support to help small operators meet compliance standards.
Disability advocates, however, caution against sweeping changes that might reduce participant choice or make it harder to access support in regional and remote areas. Many warn that if registration becomes mandatory across the board, the already stretched workforce could shrink further.
The government’s message is clear. It wants to stop shonky behaviour and protect participants from harm. Tougher fines and jail time are part of that strategy. But without confronting the sheer scale of unregistered activity in the market, the reforms risk being symbolic rather than transformative.
The NDIS was built to give people with disability more control, more dignity and more independence. Ensuring those goals are met requires a system where the people providing support are accountable, trained and visible to the regulator.
Until the unregistered sector is brought out of the shadows, enforcement alone will not be enough to restore trust in the scheme or guarantee the safety of the people who rely on it every day.
