Church-related not-for-profit organizations deliver approximately half of social services in Australia through contracting arrangements with governments. The religious dimensions have attracted remarkably little attention, but along with religious schooling and hospitals, social services are at the front line of the sacred–secular interactions in Australia. This will become even more so with the advent of the National Disability Scheme. In contemporary social services contracting we have a peculiarly Australian religious settlement where government draws on the benign and useful elements of religion while bypassing difficult and potentially dangerous theological and interdenominational disputes. However, the government, in some cases with the acquiescence of religious social service providers, is attempting to go beyond this to detach service delivery from the theological ideas, and the personal and communal practices, which sustain it. The combination of shortcomings of the economic incentive design of the contacting arrangements and lack of appreciation of the religious dimensions of the organizations involved are currently leading to erosion of quality of client service, inflexibility, transfer of risk, staffing problems, gender imbalances, and lack of innovation in the sector. There are also important religious threats to the Australian settlement. Better understanding of the religious dimensions would help ensure the efficiency and sustainability of high-quality social services in Australia, to the benefit of the mission of the churches, the government, and many vulnerable people served by the agencies.