Speaking to News Corp, Sue says William is "out there somewhere living in an Aboriginal community”.
William's mother Karlie Tyrrell dated Jacob Nichols before the toddler was born in 2011.
A friend of the Nichols family came forward with claims he could be William's father as he was with Karlie around the same time as Brendan Collins, the toddler's alleged biological father.
“I think (William) is living in a community somewhere out there," she said.
“There are little white faces among the Aboriginal kids in communities and I think he’s still alive and that’s where he is."
At the time of the disappearance, an extensive 10-day search involving police, locals and emergency services was conducted, but William was never found.