In March this year the NSW Government announced its intention to introduce reforms designed to change how psychological injury claims are defined and managed in the NSW Workers Compensation Scheme.
As one of the longest serving providers of workers compensation services in Australia, with extensive experience in managing psychological injury claims; we are ready to respond to any legislative changes.
Please find below the latest information regarding the reforms currently on the agenda for NSW below.
Key highlights for employers
Breaking news: 18 November 2025
At approximately 4:30pm on 18 November 2025 the NSW Parliament passed a modified version of the Workers Compensation Legislation Amendment Bill 2025.
This will lead to changes in the way our State’s workers compensation system operates.
The main changes passed by Parliament are as follows:
- New eligibility requirements for primary psychological injury claims.
- The establishment of a new workers compensation bullying and harassment jurisdiction in the NSW Industrial Relations Commission.
- Reasonable and necessary test as the basis for medical entitlements, as opposed to the current reasonably necessary.
- A single assessment process to determine whole person impairment (WPI), as opposed to the current approach which may require a worker to be assessed on three occasions.
- The application of a merit-based test, requiring legal representatives for both workers and insurers to certify reasonable prospects of success for litigation.
- For primary psychological claims where the WPI is assessed at less than 21%, a reduction in the entitlement periods for both weekly and medical benefits.
- An employer claims excess for up to two weeks of weekly entitlements.
- Annual indexation of entitlements, as opposed to the current biannual indexation.
If you would like to read the Bill and its passage through Parliament, you can do so through this link.
Where to from here
The next step is for the NSW Government to determine and advise the start date (or dates) for the changes. The changes will also require significant regulation to be developed and enacted by SIRA, in order to bring operative meaning to the legislation.
In addition to the changes that have passed Parliament, the Treasurer has released a statement that advises that the Government will:
- Amend the second Bill (August 2025) to reflect the compromise offered by independent members of the cross bench.
- Commission the Chief Psychiatrist to devise a better system for psychiatric impairment assessment in workers compensation claims.
The statement from the Treasurer can be found here: Next steps for workers compensation reform | NSW Government.
The second Bill will be presented to the Legislative Assembly, and it can be found here.
As a trusted claims service provider (CSP) in NSW we will continue to keep our customers informed as more information comes to hand.
Recap: the case for reform
The Treasurer on Tuesday, 18 March 2025, outlined the following in the Ministerial Statement delivered in the NSW Legislative Council:
- Most experts agree that neither scheme (Treasury Managed Fund nor Nominal Insurer) has ever dealt well with psychological injury.
- Psychological claims now make up 12% of total workers compensation claims, but 38% of the total cost.
- The number of psychological injuries has doubled in six years. By comparison, all other injuries have grown by just 16% during that same period.
- 88% of workers who suffer from physical injuries on average have returned to work within 13 weeks.
- 40% of workers with psychological injuries are still languishing in the system after one year off work; still separated from their workplace, more likely to be socially isolated.
- An employer facing no claims against them, operating a psychologically safe workplace, can expect their premiums to rise by 36% over three years to 2027-28 if we do nothing, having already faced an 8% increase in premiums for three years running.
Further, the icare FY24 Annual Report states 70% of the psychological claims reported within the Nominal Insurer are caused by harassment and work pressure. While for the TMF, these injuries are increasingly driven by exposure to trauma, occupational violence and assaults.
Links to articles
In 2022, the NSW Legislative Council’s Standing Committee on Law and Justice held two public hearings, as part of the Review of the Workers Compensation Scheme, with a particular focus on the risk in psychological injury claims. The hearing presented evidence from many various stakeholders across unions, industry associations, and regulators regarding the challenges in injury prevention and treatment.
The insights gathered here were intended to inform future reforms aimed at enhancing the system’s efficiency and effectiveness in supporting workers suffering a psychological injury.
2025
11 Feb NSW Parliament Legislative Council Hansard
5 March AFR article
5 March Treasurer at NSW Legislative Council Budget Estimates Hearing
18 March Ministerial Statement
18 March NSW Parliament Legislative Council Hansard (incl Opposition response)
18 March Unions NSW response
18 March Business NSW response
19 March NSW Parliament Legislative Assembly Question Time
19 March NSW Parliament Legislative Council – Abigail Boyd, Private Member Statement
20 March ABC Radio Breakfast – Treasurer
9 May Ministerial media release regarding workers compensation exposure draft
9 May Media release by Legislative Council
9 May Explanatory note and exposure draft released by Parliament of NSW
16 May Public hearing – liability and entitlements for psychological injury in NSW
27 May Ministerial media release
27 May NSW tweaks workplace injury reforms | Insurance News
4 June Workers Compensation reform passes key hurdle | NSW Government
5 June Legislative Council Hansard – 05 June 2025 – Proof
6 August New bill to progress urgent workers compensation reform | NSW Government
18 November Next steps for workers compensation reform | NSW Government
19 November What you need to know and do | Communities and Justice
20 November NSW moves forward with workers’ compensation overhaul | Insurance Business Australia
EML NSW employer webinar: changes to the workers compensation system in NSW
This virtual briefing on 21 November 2025, hosted by Matthew Vickers, General Manager, SME and Specialty and Katie Giddins, General Manager, NI Corporate from EML NSW, covered the key reforms shaping the future of NSW’s workers compensation in NSW.
The session followed the NSW Parliament passing a modified version of the Workers Compensation Legislation Amendment Bill 2025 which is expected to change the way our State’s workers compensation system operates.
