Legislative Update 

Significant Changes Ahead: What you Need to Know About the NSW Workers Compensation Legislative Amendments

Key takeaways

Commencement dates for most aspects of the Acts are yet to be confirmed, and Regulations and Guidelines are still to be released. These documents will inform how the changes will apply in practice.

New framework for psychological injury claims

The amendments introduce new eligibility criteria for psychological injury claims.

Click here to view the framework

Changes to entitlements, thresholds and defences

Weekly benefits and medical expenses for psychological injuries will be subject to reduced entitlement periods.

For workers below 21% whole person impairment (WPI) - increasing over time to 28% WPI by 2029 - weekly payments are limited to 130 weeks.

Workers with 21% WPI or more, but less than 25% WPI (from 1 July 2026) increasing over time to 27% WPI (from 1 July 2027) and 28% WPI (from 1 July 2029) are entitled to an additional 52 weeks of benefits (to 182 weeks), paid at 60% PIAWE less any earnings but only if:

• the insurer has assessed no current work capacity; or
• the insurer has assessed a current work capacity, and the worker has returned to work for at least 15 hours per week and is earning at least $225 per week.

The test for medical expenses changes from ‘reasonably necessary’ to ’reasonable and necessary,’ which represents a higher threshold for workers.

The reasonable management action defence under s 11A has been expanded. The test:

• now applies to management action taken in a reasonable way, and that is reasonable in all of the circumstances; and
• provides that no compensation is payable if the employer’s reasonable action was the significant cause of the psychological injury.

There is a stepwise increase in the WPI thresholds for psychological injuries occurring on 1 July 2026 (25% WPI), 1 July 2027 (27% WPI) and 1 July 2029 (28% WPI). This is the only aspect of either Act with a confirmed commencement date and will apply to new claims from 1 July 2026.

Notably, there is no change to the existing lump sum compensation or commutation thresholds.

Procedural and other changes

The amendments expand the classes of claims eligible for commutation and introduce a mechanism for the compromised resolution of death benefit claims.

Indexation of entitlements move from biannual to annual.

Notably, a single assessment process for determining WPI will replace the current arrangement where each party obtains its own assessment.

The Chief Psychiatrist will review the reliability of the Psychiatric Impairment Rating Scale (PIRS) and offer an alternative within 18 months.

Application

Click here to view

Implications

The new eligibility criteria and reduced entitlement periods for psychological injuries will apply to new claims only. The increased WPI thresholds will phase in for new claims from 1 July 2026.

However, the single WPI assessment process and the change to the medical expenses test will apply to both new and existing claims, meaning their impact will be felt immediately upon commencement (the date of which is not yet known).

While much will depend on the Regulations and Guidelines yet to be drafted, these amendments signal a significant shift in how psychological injury claims are managed in NSW.

If you require any assistance navigating these changes, please reach out to a member of our team. We will be providing training as we gain further clarity around the amendments, including once the Regulations and Guidelines are released.