Disability homes on the brink of collapse as federal government refuses bailout
January 8, 2026 — 5:30am
Almost 2000 Victorians with profound disabilities are facing potential home closures after losing state government subsidies and a refusal from the National Disability Insurance Agency (NDIA) to cover the funding shortfall. This situation has sparked a crisis in the disability care sector, with one of the major providers, Aruma, taking drastic measures to save its group homes.
Aruma, a disability service provider, has applied to the Fair Work Commission to terminate a workplace agreement for staff at services it inherited from the Victorian government. This agreement requires Aruma to pay staff at rates higher than those offered by the NDIA, a gap that was previously covered by the state government. With the deal expired on December 31, Aruma is now facing a financial shortfall that could lead to its closure.
The homes cared for by Aruma are among the 1985 disabled Victorian residents living in 500 formerly state-run residential homes. These homes have been supported by $2.1 billion in state government wage subsidies for the past eight years. However, the Victorian government has made it clear that the wage subsidy would end, and the NDIA has not provided any relief to bridge the funding gap.
Aruma's chief executive, Dr. Martin Laverty, stated that reducing staff wages and conditions is the 'lesser of two evils' compared to shutting services and issuing redundancies. He emphasized the need to guarantee the homes' viability, support for 200 residents, and job security for his 900 colleagues. The situation has created a dilemma for disability workers, participants, and families, as the termination of the agreement could lead to staffing and safety concerns.
The Fair Work decision could have broader implications for other residential services providers, who are already struggling with limited cash flow. The crisis has been years in the making, with the Health and Community Services Union warning the state government of the impending crisis. Despite the pleas, the funding was cut without a clear plan to maintain services.
The federal government's refusal to increase allocations via the NDIS has further exacerbated the situation. With the funding expired and no immediate solution in sight, the future of all 500 government-owned homes and the almost 2000 residents is uncertain. The state government spokesperson acknowledges the responsibility of the Commonwealth government in market sustainability but emphasizes the need for proactive market management.
The opposition disability spokesman, Tim Bull, expressed concern over the lack of communication between the state and federal governments in resolving the issue. The NDIA, however, remains silent on the matter, citing it as a wages issue between the company and its workforce.
This crisis highlights the challenges faced by the disability care sector and the urgent need for a sustainable funding solution to ensure the well-being of vulnerable residents and the continuity of essential services.
