Many people who should be eligible for the disability support pension find themselves stuck on the lower-paid dole or don't receive any income support at all.
Economic Justice Australia will tell a Senate inquiry into the disability pension the existing rules need changing because they are confusing and unfair.
Leanne Ho, the organisation's CEO, said apart from struggling to survive on the lower rate of payment, people with severe impairment who can't get onto DSP struggle with mutual obligations and the risk of having their payments suspended if they can't comply.
"The income support system is not working as intended to support people with disability," she said.
DSP provides income security for people with disability who are unable to work more than 15 hours a week.
But many people can't access it because claim processes and evidence requirements are complex and confusing.
EJA wants changes to the way impairment tables are used by Centrelink to assess claimants' medical reports for each of their medical and psychiatric conditions.
As well, the "program of support" - such as a work preparation program - requirement should be abolished because it meant people with severe disability can be indefinitely relegated to activity-tested payments such as JobSeeker.
And the system of obtaining medical evidence should be simplified for people with psychiatric impairments, who often have problems ensuring the evidence gathered complies with all the rules, EJA says.
The inquiry will hear from a range of groups including Anglicare, the Australian Council of Social Service and the Australian Federation of Disability Organisations.