The new NDIS definition of functional capacity: what it means for the evidence in your client’s matter

A diagnosis tells you what condition a person has. It does not tell you what that person can do on a Tuesday morning in their own home. In NDIS review and ART proceedings that gap between clinical label and lived function is often where disputes turn and a functional capacity assessment is the clinical tool designed to address it directly.

The gap between diagnosis and daily function

A diagnostic label describes a clinical condition, its severity and its likely course. What it does not describe is how that condition affects a specific person in their specific environment on a given day. Two people can share the same diagnosis and present with entirely different functional profiles: one may manage most daily tasks with minor difficulty while another cannot initiate personal care safely without step-by-step assistance at every stage. The diagnostic label does not explain that difference.

Functional capacity evidence addresses a different set of questions. It asks how much a person can do without help, how much assistance they need and what they cannot manage safely without support. Those questions are what NDIS decision-makers need answered and a functional capacity assessment is designed to answer them.

The new legal definition of functional capacity

On 27 August 2026 the Securing the NDIS for Future Generations Act 2026 inserted a statutory definition of functional capacity into the NDIS Act for the first time. The definition is in the Act now and is relevant to how decision-makers should read functional evidence in ART proceedings. Understanding both the definition and the staged commencement of the new access framework matters for legal representatives advising on current and future matters.

Under the amended legislation a person’s functional capacity in relation to any activity is their ability to undertake that activity without assistance from another person or assistive technology or equipment. Three carve-outs affect how that standard applies in practice. First, a person who uses assistive technology or modifications commonly used to undertake the activity is still assessed as having functional capacity. Second, a child who receives age-appropriate assistance from others is not treated as lacking capacity on that basis. A third carve-out applies where the technology used would not ordinarily be considered to reduce functional capacity.

Also significant is what the definition excludes. A person’s environmental and personal circumstances are not considered when assessing their functional capacity. A participant who has restructured their home, developed compensatory strategies or built routines around their impairment may still have substantially reduced functional capacity once those adaptations are set aside. An OT report that documents function only in adapted conditions without acknowledging what has been adapted may not accurately reflect the participant’s capacity under the amended definition.

The staged commencement of the new access framework requires careful attention. The definition is in the Act from 27 August 2026. Formal application to access decisions under the new framework does not commence until 1 January 2028. From that date new applicants will be assessed against a standardised evidence-based functional capacity assessment. Existing participants will be reassessed under the new framework over a three-year transition period running from January 2028 to January 2031.

The specific assessment tools and thresholds for applying the new definition have not yet been determined. The Technical Advisory Group established to advise on these questions was still working through the options as of October 2026 and public consultation on the future of NDIS access closed on 2 October 2026 without published findings. Legal representatives instructing a functional capacity assessor now should be aware that while the definition is in force the operational framework for applying it is still being developed and may evolve before the 2028 commencement date.

Key dates: staged commencement of the new functional capacity framework
Date	What happens
27 August 2026	New statutory definition of functional capacity inserted into the NDIS Act. The definition applies to all ART proceedings from this date.
1 January 2028	New access framework commences. New applicants assessed against a standardised functional capacity assessment under the new definition.
Jan 2028 – Jan 2031	Three-year transition period. Existing NDIS participants progressively reassessed under the new framework.
TBC	Assessment tools and thresholds not yet determined. The Technical Advisory Group is still consulting as of October 2026.

The six functional domains

Under s24 of the NDIS Act a person must have substantially reduced functional capacity in at least one of six activities to be eligible for the NDIS. The legislation now requires each activity to be assessed as a whole rather than by reference to individual tasks within it. A report that shows a participant can complete one task within a domain does not demonstrate on its own that their capacity in that domain is not substantially reduced. The assessor must examine the person’s capacity across the full range of tasks the domain encompasses.

The table below sets out each domain, its scope and what assessment of the whole activity requires in practice.

Functional domain	What the domain covers	What “as a whole” requires
Communication	Understanding spoken and written language, expressing needs and wants, following instructions and using communication aids or technology	Assessment must cover the ability to communicate across varied settings, using different modes and adapting to different conversation partners and conditions including stress or fatigue
Social interaction	Engaging in conversation, forming and maintaining relationships, responding appropriately in social situations and participating in community life	Assessment must examine capacity across varied social settings and with unfamiliar people and in situations involving conflict or change, not just structured one-on-one interactions
Learning	Acquiring new skills and information, retaining what has been learned, applying knowledge to new situations and following multi-step processes independently	Assessment must examine retention of new information over time, transfer of skills to new contexts and the ability to follow novel instructions without prompting
Mobility	Moving around indoors and outdoors, changing body position, walking, climbing stairs, using transport and sustaining movement across a day	Assessment must examine whether the person can sustain mobility across a full daily routine and in community environments, not just over short distances in a clinical setting
Self-care	Personal hygiene, dressing, grooming, eating and drinking, managing health conditions and responding to medical needs	Assessment must examine the full sequence of tasks across a morning routine and through the day, not just whether the person can perform a single task in isolation
Self-management	Organising daily activities, managing finances and appointments, making decisions, responding to unexpected events and managing personal affairs	Assessment must examine planning, financial management, decision-making under pressure and the ability to handle unexpected situations, not just simple daily choices

Diagnosis and functional capacity evidence: what each establishes

Understanding what each type of evidence does and does not address helps legal representatives identify what a matter requires and what may be missing. The table below sets out how diagnosis and functional capacity assessment differ in what they establish and how they relate to the NDIS evidence standard.

Diagnosis and functional capacity assessment: what each establishes
	Diagnosis	Functional capacity assessment
What it establishes	The clinical condition and its diagnostic category	What the person can and cannot do in daily activities across their own environment
Legal standard addressed	Eligibility as a person with disability (s24)	Functional capacity as defined in the amended NDIS Act
Individual variation	Two people with the same diagnosis appear the same	Two people with the same diagnosis may show entirely different functional profiles
Environmental factors	May reflect how a person functions with adaptations and supports in place	Environmental and personal circumstances are excluded under the 2026 definition
Informal supports	May reflect current functioning with informal support in place	Documents what the person can do without informal support and what gaps that creates
Support recommendations	Describes the condition; does not document specific support needs directly	Connects observed functional limitations to specific supports and explains why each is needed
ART evidence standard	May establish the disability but does not address the reasonable and necessary criteria directly	Addresses each criterion and provides the factual foundation for clinical opinion on support needs

A decision-maker applying the reasonable and necessary criteria needs evidence about function rather than condition. A diagnostic report that does not address functional capacity or an OT letter that relies on clinical language without connecting findings to daily function may leave critical gaps in the evidence base regardless of the underlying clinical picture.

The reasonable and necessary criteria

Section 34 of the NDIS Act sets out the criteria a support must meet to be funded in a participant’s plan. From 27 August 2026 the criteria include that the support must relate to the disability that makes the person eligible for the scheme, be likely to be effective and beneficial for that participant, represent value for money and take into account what informal supports can reasonably be expected to provide. A further criterion addressing whether another government scheme is more appropriately responsible takes effect from 1 February 2027.

A functional capacity assessment is relevant to several of these criteria. It can demonstrate whether the support relates to the person’s disability by showing how the impairment produces the functional limitation the support addresses. It can address effectiveness and benefit by documenting what the participant can and cannot do without the support and what difference it makes to their daily functioning. It can inform the value for money assessment by setting out the specific tasks and frequency of assistance required.

Where a participant currently receives substantial assistance from family members, carers or community services, a complete report documents what that assistance involves and what the participant’s functional position would be without it. The participant’s current level of functioning with informal supports in place does not necessarily reflect their actual support needs under the NDIS criteria.

Under the NDIS Act the s24 impairment need only be a genuine contributing cause of the need for support rather than the sole or dominant cause. This matters in cases where a participant has multiple conditions or where the support need arises from the combined effect of disability and other factors. A report that documents each relevant impairment and its functional contribution addresses this rather than relying on the primary diagnosis to carry the weight of the analysis.

What the ART Practice Direction requires of expert evidence

When a functional capacity assessment is used as expert evidence in ART proceedings it must meet the requirements of the Administrative Review Tribunal (Expert Evidence) Practice Direction 2026. The report must state the expert’s qualifications and relevant experience, identify the questions they were asked and the materials they received, set out the facts and assumptions underlying each opinion with their sources and give reasons for every opinion expressed. Where a question falls outside the expert’s area of expertise the report must say so.

An expert witness before the ART has an overriding duty to assist the Tribunal impartially. That duty prevails over any obligation to the party who instructed the assessment. A report that presents only evidence favourable to the instructing party or reaches conclusions the underlying facts do not support does not meet that standard. The Practice Direction also requires disclosure of any pre-existing relationship between the expert and the engaging party and any unusual fee arrangement such as payment tied to the outcome of the matter.

For legal representatives instructing an expert the letter of instruction shapes what the report can address. Questions framed with precision and neutrality, asking the expert to record observations and give clinical opinion on specific questions, give the expert room to produce a report that meets the Practice Direction standard.

The 2026 reassessment threshold

From 27 August 2026 requests for an unscheduled plan reassessment operate under a higher threshold. A request must now demonstrate a significant and ongoing change in the participant’s functional capacity or support needs since the current plan was made. Assertions about changed needs without documented functional evidence are unlikely to be sufficient.

A current functional capacity assessment serves this purpose where a participant’s profile has genuinely changed. It documents the nature and extent of the change in concrete terms, setting out the participant’s current functional status and identifying what support needs have emerged as a result.

Changed circumstances that bear on support needs do not have to involve a change in diagnosis. A change in living arrangements, loss of an informal carer, deterioration in health status or an increase in symptom severity may each affect daily functioning without altering the underlying diagnosis. A functional assessment is the appropriate tool for documenting those changes.

Once a reassessment request is lodged the NDIA has up to 90 days to decide it. If no decision is made within that period the request is treated as a deemed refusal. A deemed refusal is itself a reviewable decision that may be taken to internal review and then to the ART.

Reviewing an OT report: questions worth asking

When reviewing a functional capacity report relied on in NDIS review or ART proceedings these questions are worth working through regardless of which party commissioned the report.

Does the report engage with functional capacity as defined in the amended NDIS Act? Does it assess each relevant functional domain as a whole rather than by reference to isolated task performance? Does it state what was directly observed by the assessor and distinguish that from what the participant reported? Does it document informal supports and address what the participant’s functional position would be without them?

For reports filed in ART proceedings: does it state the expert’s qualifications and their relevance to the questions asked? Does it identify the materials the expert received? Does it set out the facts and assumptions underlying each opinion with their sources? Does it give reasons for each opinion expressed?

A report that addresses these questions in plain terms gives a decision-maker what they need to apply the relevant criteria without having to supply the analysis themselves. A report that does not may still contain sound clinical findings but leaves the analytical work to the decision-maker rather than the expert.

Our clinical approach

At Sina OT all functional capacity assessments are conducted in person in the participant’s own environment. Each relevant functional domain is examined through direct observation and standardised clinical tools. Observed findings are documented separately from what the participant reported and each finding is connected to the specific questions the matter requires. Reports prepared for review or ART proceedings engage with the amended NDIS functional capacity definition and the reasonable and necessary criteria. They are also prepared to meet the requirements of the ART Expert Evidence Practice Direction 2026.

What this means for referrers

When reviewing any OT report relied on in a matter you are advising on, three questions are worth asking. Does the report engage with functional capacity as the amended NDIS Act now defines it? Does it assess each relevant domain as a whole? Does it trace the connection from impairment to function to support need in terms a decision-maker can apply without having to fill the analytical gaps themselves?

Legal representatives considering instructing Sina OT for NDIS review or ART matters are welcome to make an enquiry through our website.