Federal Budget 2026–27: What it means for Occupational Therapy

Last night, the Treasurer handed down this Government’s fifth Federal Budget. Alongside property tax reform, NDIS reform is a central feature of this Budget, confirming the Government’s intention to significantly reshape eligibility, assessment, planning and access to services and supports.

These changes will have material implications for occupational therapists and people they work with, particularly those working in disability, early childhood, psychosocial supports and aged care.

This update provides OTA’s initial summary of Budget measures most relevant to the occupational therapy workforce. We will continue to analyse the detail as it becomes available and advocate on issues of concern to the profession.

Members are encouraged to stay informed via the OTA Weekly newsletter and to register for the Member Forum on Friday 15 May, where we will unpack the implications in more detail.

Disability and the NDIS

NDIS reform: Budget overview

The Budget outlines reforms designed to “secure the NDIS for future generations” by tightening eligibility, improving planning consistency and strengthening integrity and oversight. Measures are framed around four pillars:

Quality services and supports
Clearer eligibility
Slower cost growth
Stronger fraud and compliance action

Key announcements include:

Standardised, evidence based functional capacity assessments to support clearer and more consistent access decisions.
Tighter criteria for plan reassessments and strengthened guidance on what is considered “reasonable and necessary”.
Reset budgets for social, civic and community participation and capacity building daily activities.
A shift to New Framework Planning from April 2027.
Expanded integrity and compliance measures, including greater provider and payment oversight.
Establishment of a $200 million Inclusive Communities Fund (held in the Contingency Reserve) to support group based social participation and individual capacity building activities for NDIS participants.

Key figures and timelines

NDIS reforms are projected to save $37.8 billion over four years, while total scheme expenditure continues to grow each year.
New Framework Planning is scheduled to commence from April 2027.
$48.4 million over three years (from 2025–26) has been allocated to support consultation on and implementation of NDIS reforms.
$3.3 million in 2026–27 will establish a Technical Advisory Group to support the design of functional capacity assessment tools.
$200 million over three years (from 2026–27) is allocated to the Inclusive Communities Fund.

Impact on participants

Previous Government announcements and data from the NDIA indicate that more than 160,000 current NDIS participants may exit the scheme as eligibility settings are overhauled. People with autism and lower support needs are expected to be most affected, as the scheme is refocused on permanent and severe disability.

Many of the approximately 166,000 children aged 0–8 currently on the NDIS with developmental delay or autism are expected to transition into new Foundational Supports, beginning with the Thriving Kids initiative.

Foundational Supports and Thriving Kids (Phase 1)

Thriving Kids: what’s funded

Governments have committed to a $4 billion joint investment over five years (including a $2 billion Commonwealth contribution) to establish Thriving Kids as the first phase of Foundational Supports.

Thriving Kids will support children aged 8 and under with developmental delay and/or autism who have low to moderate support needs, as well as their families, carers and kin.

Key elements include:

Medicare Thriving Kids: a national information, advice and navigation function to help families connect with appropriate supports.
Additional autism specific supports, delivered through states and territories.
A Medicare funded health and development assessment at age 3 to support early identification and referral.
A National Digital Child Health Record, delivered through My Health Record, to support tracking and information sharing.
Workforce initiatives to strengthen early childhood development practice, including culturally appropriate supports.

Funding details

$126.1 million over five years (from 2026–27) for the Medicare funded three year old assessment.
$99.5 million over five years (from 2026–27) to support parents, carers and kin, including through:
- Mental Health in Primary Schools
- The Positive Partnerships Program
- The National Digital Child Health Record

In addition to Thriving Kids, the Budget provisions a further $3 billion for other Foundational Supports outside the NDIS, subject to state and territory matching.

Notably, the Budget does not yet provide detail on the adult psychosocial Foundational Supports model. This remains a priority area for OTA advocacy.

Mental health and psychosocial disability

Building on the Government’s broader $1.1 billion mental health package, the Budget allocates:

$277.5 million in 2026–27 to extend the National Mental Health and Suicide Prevention Agreement to 30 June 2027, including:
- $206.8 million for existing services
- $70.4 million to extend terminating bilateral mental health and suicide prevention activities

These include suicide prevention and aftercare, perinatal screening, eating disorder supports and jurisdiction specific measures. Several initiatives expand or extend services for adults and young people, with implications for the psychosocial disability workforce.

An additional $8.2 million over three years (from 2025–26) will extend:

The Small Business Debt Helpline financial counselling program, and
The New Access for Small Business Owners mental health coaching program.

Hospitals, Medicare and Digital Health

Under a January 2026 agreement with states and territories, the Commonwealth will provide $25 billion in additional funding for public hospitals.

The 2026–27 Budget also includes measures to:

Make Medicare Urgent Care Clinics permanent
Establish new fully bulk billing GP clinics in regions with historically low bulk billing rates
Further enhance My Health Record to improve access to health data
Reduce out of pocket costs for older Australians receiving intravitreal eye injections
Invest in Aboriginal Community Controlled Health Services, culturally safe mental health supports and Birthing on Country services

This Budget also includes investment to maintain critical health services in areas including mental health and cancer care, and for Aboriginal and Torres Strait Islander health to ensure all Australians can access affordable, high-quality health care when and where they need it.

Aged care

The Budget confirms earlier announcements committing $3.7 billion to aged care, including:

5,000 additional residential aged care beds per year, targeted to people with limited financial means
Faster access to Support at Home places, with improved assessments and reduced wait times
Free personal care services alongside clinical care
Expanded end of life and dementia care programs

Key issues for occupational therapy

There was no announcement on the future of the Commonwealth Home Support Programme (CHSP), which is scheduled to transition into Support at Home from 1 July 2027.

CHSP has long been valued by allied health professionals for its targeted, community based approach and focus on functional outcomes. The absence of new investment continues to create uncertainty and pressure for occupational therapists seeking to align service models with Support at Home settings.

Support at Home pricing caps, previously announced to commence from 1 July 2026, were also not addressed in this Budget. There was no update on the Government’s Integrated Assessment Tool, despite ongoing concerns raised by the sector..

Veterans’ Health

The Budget delivers long awaited improvements for veterans by increasing DVA allied health fees, reducing red tape, and aligning payments with NDIS rates through sustained new investment.

DVA allied health fees will increase and align with NDIS rates, addressing the lack of indexation to date.
$169.7 million is allocated to lift allied health provider fees and support service viability.
Treatment cycle requirements will be removed, significantly reducing administrative burden for providers.
From 1 July 2027, treatment cycles will be replaced with an annual allied health cap of $5,000 per veteran.
Overall Government investment in veterans’ health totals $173.7 million over five years from 2025–26, including $58.8 million per year ongoing.

OTA welcomes increased investment in Allied Health provision for Veterans and is directly engaging with Department representatives’ post-budget to seek clarity regarding the announcement.

Aboriginal and Torres Strait Islander Health

The Budget includes targeted investment to strengthen culturally safe, community controlled health services for Aboriginal and Torres Strait Islander people across maternity care, mental health, chronic disease and aged care.

Funding for 10 Birthing on Country initiatives across urban, rural, remote and very remote locations, delivered by or in partnership with Aboriginal Community Controlled Health Services (ACCHS).
Expanded Birthing on Country services will improve healthy birthweight outcomes and create local workforce opportunities by employing midwives and nurses in regional and remote communities.
A funding boost for 13YARN will improve access to culturally safe crisis support, helping meet rising demand, strengthen community and digital engagement, and establish a new crisis text line.
Investment in new and upgraded ACCHS health clinics, along with associated housing for health professionals, particularly in regional and remote areas.
Continued support for dialysis units in remote and very remote communities, enabling more than 12,650 treatments per year and improving access to life sustaining, culturally safe care for people with kidney disease.
Stolen Generations Redress Scheme payments will be exempt from residential aged care asset testing, supported by $3.2 million over four years from 2026–27 ($0.4 million per year ongoing).

Regional, Rural, Remote Health

OTA is disappointed to this budget’s failure to invest in strong allied health workforce pipelines, including expanding Commonwealth Prac Payments to allied health students. The Department of Health, Aged Care and Disability’s review of the Modified Monash Model identified several misalignments pertaining to allied health workforce shortages in rural, regional and remote areas, and noted workforce recruitment/retention challenges for Allied Health practitioners.

OTA Advocacy

OTA will continue to engage closely with Government, departments and agencies as reforms are designed and implemented. Our advocacy priorities include:

Workforce transition support for Thriving Kids, including nationally consistent guidance, professional development and practical implementation supports for occupational therapists.
A clear, funded psychosocial Foundational Supports model for adults, co designed with the sector and aligned with recovery oriented, functional practice.
Assessment and planning approaches that reflect occupational therapy expertise, particularly in functional capacity, participation and environmental supports.
Sustainable workforce pipelines, including funded student placements, supervision and graduate pathways, and expansion of the Commonwealth Prac Payment to allied health.
Targeted strategies to address rural, regional and remote workforce shortages, ensuring equitable access to occupational therapy services across Australia.
Aged care reforms that value early intervention and prevention, including retention of CHSP alongside Support at Home and pricing that reflects the value of occupational therapy.

OTA will continue to work with members to ensure that policy reform translates into safe, effective and sustainable practice environments, and that occupational therapists are recognised as essential contributors across the care economy.

What happens next

This Budget confirms a significant structural reset across disability, early childhood and aged care systems. While funding for Foundational Supports is now locked in, many design details remain unresolved – particularly for adults with psychosocial disability and for allied health delivery models.

OTA will continue to engage with Government, analyse emerging detail and advocate for settings that enable occupational therapists to deliver high quality, evidence based care.

Members are encouraged to:

Read our updates in the OTA Weekly newsletter
Register for our next Member Forum on NDIS Reform Updates, scheduled for Friday 15 May
Share feedback and on the ground impacts to inform our advocacy – policy@otaus.com.au
Sign up to our new campaign – No OTs, No NDIS, launching this week