Australia to crack down on sale of NDIS shell companies

The Australian federal government is launching a crackdown on the burgeoning trade of pre-registered "shell" companies within the National Disability Insurance Scheme (NDIS), introducing tougher regulations to prevent the sale of these entities and bypass essential scrutiny.

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We do see circumstances where pre-registered shell companies are offered on the market.

Effective July 1, disability service providers will face new obligations, including promptly notifying the NDIS Quality and Safeguards Commission (QSC) about any impending sale. Furthermore, mandatory re-audits will be triggered if a change in ownership substantially alters how the business operates. This initiative responds to a market where high demand for NDIS services and the complexity of compliance have fueled a demand for shortcuts, with some operators seeking to purchase pre-approved companies rather than undergo the full registration and audit process.

Online platforms like Facebook groups, Marketplace, and Gumtree are currently inundated with advertisements from individuals and consultants selling policies, compliance documents, and "guaranteed" audit success for thousands of dollars. These businesses are often marketed as "turnkey" solutions, promising instant entry into the disability sector by acquiring a "fully compliant" company. Some advertised businesses have fetched prices as high as $120,000, presenting themselves as ready-to-operate entities for investors.

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It creates a risk that an unsuitable person is operating a company providing services to people with disability, and we do not want this to continue.

NDIS Minister Jenny McAllister stated that the government's action is designed to eliminate a loophole that poses risks to NDIS participants. "We do see circumstances where pre-registered shell companies are offered on the market," she said. "It creates a risk that an unsuitable person is operating a company providing services to people with disability, and we do not want this to continue." Senator McAllister emphasized that closing this loophole is crucial for preserving trust in the NDIS, noting that the new rules require notification upon the likelihood of a sale and subsequent assessment against quality standards for material changes.

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Our changes will mean that the minute a person with a business knows that a sale is likely to take place, they're required to notify the commission.

This regulatory tightening is part of a broader effort to strengthen oversight and ensure the long-term viability of the NDIS, which currently exceeds $50 billion in annual costs. The changes coincide with the initial phase of mandatory registration requirements for NDIS providers, starting July 1, affecting digital platform and supported independent living providers. Future legislation aims to expand mandatory registration to all "high-risk" providers.

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And where there are material changes, that company will be required to undergo a new audit and be assessed against the quality standards.