Subscribe Sitemap
Subscribe Sitemap

Deductible proportion for psychological impairment - evidence of pre-2002 rateable impairment required

  • Newsletter Article
  • Published 14.09.2022

Dixon v State of New South Wales (Fire & Rescue NSW) (NSWPIC 2022)

Link to Decision

Key Takeaways

The 2002 amendments made to the Workers Compensation Act 1987 (the 1987 Act) introduced the payment of lump sum compensation for psychological injuries.

The transitional provisions contained in Sch6, Part 18C cl 3 of the 1987 Act provide for a reduction in the compensation payable for any impairment found to be due to events that occurred before the commencement of the amendments.

The PIC has determined that lay or expert medical evidence of a rateable psychological impairment prior to 1 January 2002 is required to establish that a proportion of the compensation payable for a psychological injury is deductible.

Brief Facts

In Dixon v State of New South Wales (Fire & Rescue NSW) (NSWPIC 2022), the applicant, an exempt worker, brought a claim for lump sum compensation for an accepted psychological injury deemed to have occurred on 6 December 2002.

The applicant was referred to a medical assessor who issued a Medical Assessment Certificate (MAC) assessing 20% WPI. Subsequently, the parties were unable to reach agreement as to the amount of compensation payable for pain and suffering under s67. The respondent also argued that a reduction in the award of compensation should be applied due to the transitional provisions contained in Sch 6, Pt 18C cl3 of the 1987 Act which relevantly provide:
(1) ....
(2) There is to be a reduction in the compensation payable under Division 4 of Part 3 (as amended by the lump sum compensation amendments) for any proportion of the permanent impairment concerned that is a previously non-compensable impairment. This subclause does not limit the operation of s323 of the 1998 Act or s68B of the 1987 Act.
(3)   A ‘previously non-compensable impairment’ is loss or impairment that is due to something that occurred before the commencement of the amendments to Division 4 of Part 3 made by the lump sum compensation amendments, being loss or impairment that is a kind for which no compensation was payable under that Division before that commencement.


In considering the application of Sch 6, Pt 18C cl 3, the Member stated that it is necessary to consider whether the applicant had an assessable, though non-compensable, impairment on 31 December 2001. He found that this could be ascertained by either:

  • using the approach set out in 11.10 of the SIRA Guidelines to the Evaluation of Permanent Impairment (Guidelines) by making an inquiry into whether the applicant had an assessable, though non-compensable, impairment on 31 December 2001. If the answer to that was ‘yes’, then a deduction is made for the non-compensable impairment; or
  • undertaking a causal analysis similar to the application of s323 of the Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act) to determine whether there was a non-compensable loss incurred.

In applying the first approach under the Guidelines, pre-existing impairment is calculated using the same method for calculating a current impairment in accordance with the categories of the Psychiatric Rating Scale (PIRS). Using all available information, an assessor rates the injured worker’s pre-injury level of functioning. The pre-existing percentage of WPI is then subtracted from the worker’s current level to obtain the percentage of permanent impairment directly attributable to the work-related injury. The Guidelines also provide that if the percentage of pre-existing impairment cannot be assessed, the deduction is 1/10th of the assessed WPI.

The application of the second approach requires the assessor to conduct an analysis as to whether, and if so, to what extent, a pre-existing condition has caused or contributed to the injured worker’s current impairment. (See Cole v Wenaline Pty Ltd (NSWSC 2010)). If the extent of a deduction will be difficult or costly to determine a deduction of 10% of the impairment applies, unless this is at odds with the available evidence.

In the current case, the employer alleged that the applicant was exposed to repeated and significant traumatic events before 1 January 2002 for which a deduction applied. While the Member accepted that the evidence supported the pre-1 January 2002 exposure, he considered there was a lack of expert opinion as to whether a deductible proportion applied, and if so, the extent of the deduction.

The Member referred to the MAC and acknowledged that this contained commentary of PTSD symptoms experienced by the applicant in or about 2001. However, the Member found the presence of symptoms to be insufficient to satisfy the requirements for making out a deductible proportion without establishing the presence of functional limitations under the PIRS. Such ratings were considered relevant in that they ‘ground findings of impairment’.

The Member also found there was an absence of medical evidence addressing the s323 causal analysis and as such, there was no basis to find that the events before 1 January 2002 resulted in a rateable, but non-compensable, impairment.


This case emphasises the value of obtaining expert medical opinion to support any argument in favour of a reduction in the lump sum compensation payable for pre-1 January 2002 psychological impairment. It is important to ask the expert to address whether an injured worker experienced functional limitations that resulted an assessable psychological impairment before that date.