Our experts have developed a comprehensive checklist and resource hub to help you prepare for the upcoming legislative changes to the NSW Workers Compensation Scheme.
Through the resources hub you can access information, resources and services today including:
- a downloadable employer legislative reform checklist
- a clear summary of the reforms and what they mean in practice
- guidance regarding employer obligations
- links to training, tools and resources to support employers prepare their businesses for change.
The NSW workers compensation reforms commenced on 1 July 2026, introducing significant changes to how psychological injury claims are defined and managed within the NSW Workers Compensation Scheme.
As one of Australia’s longest-serving workers compensation providers, with extensive experience supporting psychological injury claims, we are well positioned to help employers navigate the changes.
Please find below the latest information regarding the reforms currently on the agenda for NSW below.
Reasonable and necessary treatment changes
From 1 October 2026, changes to treatment requests will be assessed under a new framework of ‘reasonable and necessary’ rather than ‘reasonably necessary’. This places a stronger focus on effective evidence based, purposeful treatments that genuinely contribute to recovery from injury or illness.
Implementation of reforms
Implementation of the biggest changes to the NSW workers compensation scheme in over a decade.
Final regulations and guidelines published
The NSW Government confirmed a number of significant changes under the amendment Acts would commence on 1 July 2026, including new eligibility requirements, entitlement limits and review processes for primary psychological injury claims, and updated excess rules.
Regulations & guidelines consultation
The NSW Government released draft regulations and guidelines to support the amendments to the NSW Workers Compensation Scheme. NSW employers were invited to provide feedback as part of the consultation process.
Initial provisions commence
Several workers compensation reforms came into effect on 27 March 2026, including changes to governance, privacy protections, premium settings and system oversight.
Reform & Modernisation Act passed
A second Bill was passed on 5 February 2026, introducing changes to Whole Person Impairment (WPI) thresholds for psychological injuries and legislating a freeze on premium rates until 2028.
Amendment Act 2025 passed
Nov 2025 – Amendment Act 2025 passed
On 18 November, the NSW Parliament passed a modified version of the Workers Compensation Legislation Amendment Bill 2025, introducing major reforms to psychological injury claims, treatment entitlements, impairment assessments, excess and dispute resolution processes.
Exposure draft and consultation begin
The government released the Exposure Draft Workers Compensation Legislation Amendment Bill 2025, followed by its formal introduction to Parliament.
The Bill was referred to a Parliamentary Inquiry. Multiple public hearings were conducted with insurers, employers, unions, legal representatives and other stakeholders providing evidence and submissions.
Reform agenda announced
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 aimed at reducing scheme costs and increasing employer focus on prevention.
Key highlights for employers
News: 1 October 2026
From 1 October 2026, requests for treatment and services under the NSW workers compensation scheme will be assessed under a new "reasonable and necessary" test.
This replaces the current “reasonably necessary” test used to determine whether treatment and services can be covered and paid for under a claim.
The new legislation sets out factors that must be considered when determining whether treatment or services are reasonable and necessary.
Under section 60 of the Workers Compensation Act 1987 and clause 8P of the Workers Compensation Regulation, treatment or services must:
have a primary purpose of treating the work-related injury
be clinically justified for the treatment of that injury
be cost-effective and represent value for money.
A treatment or service represents value for money where the costs are reasonable relative to the benefits achieved and the costs of alternative treatment or service options.
News: 21 April 2026
The NSW Government released draft regulations and guidelines to support the amendments to the NSW Workers Compensation Scheme.
NSW employers have until Friday, 15 May 2026 to provide feedback through the: NSW Workers Compensation Reform Regulations and Guidelines feedback | Have Your Say
Key elements of the guidelines include:
- An update to employer excess arrangements and how the two-week excess period is applied.
- Introduction of new processes for claims relating to primary psychological injuries, including evidence requirements, interim payments and dispute pathways.
- Clarification on what medical treatment and services insurers are required to pay for, including clearer tests for “reasonable and necessary” treatment and specific exclusions.
- Changes to how permanent impairment is assessed, limiting reassessments and strengthening finality of outcomes.
- Establishment of a new, time‑limited framework for commutation of compensation payments (such as weekly payments) to a single lump sum.
News: 30 March 2026
Several workers compensation reforms commenced on 27 March 2026. The changes include:
- new powers for the Personal Injury Commission to appoint tutors for people under legal incapacity
- enhanced controls on the publication of sensitive information
- a two year freeze on the Nominal Insurer’s premium target collection rate, and
- the commencement of an independent review of the Psychiatric Impairment Rating Scale to assess its ongoing suitability.
The full details are available through the ministerial release which is available here.
News: 5 February 2026
A second Bill was passed on 5 February 2026, introducing changes to Whole Person Impairment (WPI) thresholds and legislating a freeze on premium rates until 2028.
Importantly, the new Bill provides that:
- Workers with a primary psychological injury claim are entitled to 130 weeks of weekly benefits unless:
o They are assessed with a WPI of:
• 21% – 25% – then they can access an additional year of weekly benefits at either 60% of their PIAWE or the maximum weekly compensation amount (whichever is less)
• over 25%.
o The 25% threshold will increase to 26% on 1 July 2027 and to 28% by 1 July 2029. - Workers must meet the new WPI threshold to claim work injury damages.
- There can be no increases in the insurance premium rate by the Nominal Insurer until 30 June 2028. This means that an employer’s premium may still change each year based on their wages and claims experience but the industry rates and other adjustment factors will remain stable.
The full details of the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 can be found here.
News: 11 December 2025
An agreement has been reached on reforms to the state’s workers compensation scheme which will allow the Workers Compensation Legislation Amendment Bill 2025 to pass the Upper House in February 2026.
A key element of the agreed reforms is a legislative 18-month restriction on average premium increases.
The full details are available through the ministerial release which is available here.
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.
The statement from the Treasurer can be found here: Next steps for workers compensation reform | NSW Government.
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
2026
20 January Workers Compensation Reform FAQs | icare
3 February Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025
If you are an employer in NSW and have a question regarding the reforms, please fill in our online query form and our team will come back to you with guidance on what is changing.
