Australia's most notorious cult leader is close to death in a suburban Melbourne nursing home as remaining members of the sect she formed in the 1960s scramble for control, sources say.

Anne Hamilton-Byrne, 83, led the infamous Melbourne cult, The Family. She has had dementia since 2007 and lives in a nursing home in Wantirna South. Police and legal sources and also former victims of the cult say Hamilton-Byrne is now incapacitated.

The Lake Eildon property.

From the 1960s she was the cult's head at properties in the Dandenongs and Lake Eildon where dozens of children, obtained through adoption scams were allegedly kept, treated cruelly and administered LSD.

The children were told she was a living God and were taught extreme Christianity and Eastern mysticism. Their hair was dyed blond and they were made to dress identically.