Disability service providers who encourage participants to misuse or burn through their funding, racking up billions of dollars in costs, are facing a government crackdown.
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Revelations the practice led to more than $3 billion in NDIS overspending in a year has prompted the NDIA and the NDIS Quality and Safeguards Commission to warn plan managers of their obligations.
NDIS Minister Bill Shorten said overspending was a key issue for the sector and was often done so extra funding could be received within their plan's time frame.
"I want my message to be clear: the party is over," Mr Shorten said.
"Plan managers are facilitating an early exhaustion of a plan and then contacting the NDIA demanding a reassessment and a funding increase.
"This exploitation is inexcusable and has to stop."
The letter also detailed how anonymised data from 900 case managers showed more than a third would have failed a statement of tax record at the time.
For the 12 months to February 2024, overspending, also known as intra-plan inflation, drove more than $3.3 billion in additional NDIS costs.
More than 100,000 participants, 15 per cent, overspent their plan budgets before the end of the plan period.
Mr Shorten said the NDIS had $500 million a year to pay plan managers, and support worker costs were one of the main reasons people's plans were going over budget.
The two other most prominent contributors are overspending core budgets outside of intended purpose and claiming supports incorrectly.
Mobile phones, bond for cleaning fees, theme park passes, treadmills, TV antennas, birdseed are among supports participants claimed incorrectly.
The federal budget designated $20 million to help participants navigate services, including the place of plan managers and support co-ordinators.
Australian Associated Press
