Ms Gillard this morning announced a 0.5 per cent increase to the Medicare levy to help fund the scheme, now known as DisabilityCare Australia.
Earlier, she said the levy would not be legislated in the life of this Parliament, but that voters will "make their choice" in the September 14 federal election.
Opposition Leader Tony Abbott has challenged the Prime Minister to bring the matter before Parliament this term, although refused to say if he would support it.
"If she thinks she knows what she wants, let's get this legislation into the Parliament, and I'm very happy to deal with it in the four [sitting] weeks after the budget," he said.
The call has prompted the Prime Minister to issue her own challenge.
"If the Leader of the Opposition is prepared to support this half-a-per-cent increase in the Medicare levy to fund DisabilityCare then I will bring this legislation into Parliament immediately," she said.
"If the Leader of the Opposition is unable to answer the question what he believes in about this matter, or wants to oppose this increase to the Medicare levy, then I will take it to the Australian people in September."
The latest salvo was fired by Mr Abbott in a brief statement to camera late this afternoon.
"This has been another chaotic day from the government," he said.
"The Prime Minister has had two positions in the one day on something she's supposed to have been thinking about for two years."
Mr Abbott refused to take any questions but said the Opposition would have more to say tomorrow.
"I want everyone to know that the Coalition wholeheartedly supports the national disability insurance scheme," he added.
"We want it to happen; we want it to happen in this term of Parliament."
The Greens have criticised the Prime Minister for making the scheme an election issue.
"She has said its something she's passionate about, that it's a big reform, but she's not prepared to legislate it when she's got the numbers in the parliament to make it law now, before the election," Greens leader Christine Milne told ABC News 24.
"I think that's really a cynical move."
But Ms Milne has also refused to say if she supported the levy or not.
The Prime Minister has made it clear she does not want to take the measure to Parliament before the election if passing it depends on negotiating with the Greens and the crossbench.
"I'm not going to take this to the Parliament and have this become a political plaything," she told Sky News.
How the increase will affect you
*Figures based on annual income
|Taxable income||Levy increase|
The Government's plan includes partly funding the multi-billion-dollar scheme through a 0.5 per cent increase to the existing Medicare levy, taking it to 2 per cent from July 1, 2014.
That will raise $3.2 billion a year. However when it is fully operational in 2018-19, the scheme is estimated to cost a total of $8 billion a year.
Flanked by Treasurer Wayne Swan and Minister for Disability Reform Jenny Macklin, Ms Gillard said the extra money would have to come from federal and state and territory coffers.
"The Government will need to make savings for that full cost and there will be no free ride for states and territories - they'll need to step up too," she said.
The Opposition has refused to state whether it supports the levy, instead calling on the Prime Minister to bring on the legislation before the election.
"If she's fair dinkum why not do it in this Parliament?" Opposition Leader Tony Abbott said.
"We've got a month of Parliament left after budget week. Why not get the legislation into the Parliament, deal with it in this Parliament so then we can get on with the job of building the kind of national disability scheme that all Australians would like to see."
However, Mr Abbott said he would only vote for the scheme if he "thought it was responsibly funded".
"Let's get the detail," he said.
"She's given us half the detail, half the funding - more or less - let's see the rest of it."
The Prime Minister has issued a challenge to Mr Abbott to outline exactly what he would cut to fund the scheme, if he did not support the levy.
She says he owes that to the people living with disabilities in Australia.
"If Mr Abbott says that there is another way to do this, then he owes those people not platitudes, he owes those people precise facts," she said.
"This is really serious, not for political platitudes and a slogan, not for the talking of nonsense."
Shadow treasurer Joe Hockey said this morning that it is not the right time to be imposing new taxes.
"The reason why we have grave concerns about having a levy is because business and consumer confidence is fragile and a new levy is not going to help business and consumer confidence," Mr Hockey told Radio National.
Ramping up the pressure on the Coalition, Mr Swan chose to highlight its policy to impose a 1.5 per cent levy on big business to fund a paid parental leave scheme which would pay a woman her full wage for six months, capped at $150,000.
"Mr Hockey thinks it's fair enough for there to be a levy to pay for a parental leave scheme for people on very high incomes, but it's not fair enough to have a modest levy to support the most disadvantaged Australians," he said.
"I think that says a lot about Mr Hockey and the Liberal Party."
Mr Abbott says the two schemes are "entirely different".
DisabilityCare funding breakdown over 10 years
|New South Wales||$3.2 billion|
|Western Australia||$976 million|
|South Australia||$727 million|
|Northern Territory||$92 million|
"There's a world of difference between that and the paid parental leave levy because that is just on one business in 200 ... that levy will fully fund the [paid parental leave] scheme."
One prominent conservative government leader has voiced his support for a levy for DisabilityCare: Queensland Premier Campbell Newman says the NDIS is a bold and important social reform.
"It is the right thing to do," he told Fairfax Radio.
"But it is a matter of the public record that last year myself and other premiers did say one evening to her (Ms Gillard) that we would support her on such a move."
Mr Swan has painted the levy as a "big social reform".
"This is a logical extension of the arrangements that are in place with Medicare, because this is, if you like, one of the last big social reforms that needs to be put in place in our country," he said.
"We are asking people to pay a little more, to pay a little more to do a lot more for a group of Australians who have been left behind."
The Treasurer says collecting the levy from next year will provide a "stable, secure funding stream" for disability services.
"What that means in the early years is that the funds accumulate," Mr Swan said.
"Then, as the states become more deeply involved, as the Commonwealth spends more money and more resources, there is a fund to kick-start those activities; so when it comes to 2018-19, which is the first full year right around the country, we've got the critical mass to support this vital reform."
Ms Gillard said she had "thought about this deeply and ... changed my mind" about imposing a levy, because of a multi-billion-dollar revenue write-down to the federal budget bottom line and because of the need to give greater financial support to states and territories.
The Prime Minister said a levy would also give certainty to the 410,000 Australians currently living with disabilities.
Originally proposed by the Productivity Commission as the NDIS, DisabilityCare aims to shift funding for disability away from welfare to a system based on social insurance.
It can help people receive funding to buy a more suitable wheelchair, hire a formal carer to offer respite for relatives, make home modifications or receive other long-term support.
Money collected through the levy will go into a dedicated fund, with a quarter given as grants to the states and territories to help them build up the sector.
Craig Wallace from People with Disability Australia supports the levy, saying it is the right way to fund the scheme.
While he would like the legislation passed before the election, Mr Wallace believes bipartisan support for the levy is the most crucial factor.
"Australians with disabilities are sick of waiting for this," he said.
"We believe it needs to be done now. What a levy does is it shields this from the budget cycle, from the electoral cycle.
"It locks it in, it makes it perpetual. It means there's secure underpinning of the scheme."
Julia Gillard has confirmed there will be a rise in the Medicare levy by 0.5 percent to fund the NDIS.
No pension crackdown
Ms Macklin says the levy will give certainty for all Australians.
"It means that each and every one of us is contributing to the security and peace of mind that will say to every Australian - if disability should strike you or your family, you will get the care and support that you need," she said.
Ms Macklin moved to reassure people the Government is not considering a crackdown on the disability pension, denying reports earlier today that the pension would be cut to help fund part of the scheme.
"I know that this is of serious concern to people with a disability and carers and their families," she said.
"I want to say to those families that there will not be any further changes to the disability support pension in the upcoming budget."
DisabilityCare will begin at launch sites around the country, except for Western Australia, from this July.
Only South Australia, the ACT and New South Wales have so far signed up to the scheme in full, however the Federal Government hopes to secure more agreements soon.