Scarlets can be bred in a breeding cabinet. It is not a great idea to try and colony breed them as they can get aggressive breeding season - most aussie parrots' breeding season is usually from July to December/January. When I had them I gave them a cockatiel sized nest box.
our scarlets used to start nesting around Oct (sometimes sept) till about march - that was nsw mid north coast. Best setup? give them a choice of 2 nesting boxes in different spots, regular worming, regular fresh greens, and a draft free environment, they go best one pair per avairy, or a pair of bourkes can usually go in with them too