Following announcements in late 2025 and early 2026, the NSW Workers Compensation Reforms took effect from 1 July 2026.
Overall, these changes affect how injuries are assessed, how claims are managed, and the support available to people who have been injured at work, mainly with a focus on psychological injuries.
Key points to consider following these changes include:
PIAWE Indexation
Currently the PIAWE is indexed twice a year (every April and September). The reforms will reduce indexation to once a year from the 1st of April 2027.
Psychological Injury Claims
Psychological injury claims will only be compensable if caused by a defined “Relevant Event”. This means that no compensation is payable for a primary psychological injury unless:
- The injury was caused by a relevant event (e.g. bullying, harassment, act of violence, etc.)
- There is a real and direct connection between the event(s) and the worker’s employment
- Employment is the main contributing factor to the injury.
Examples for a “relevant event” could include being subjected to an act of violence or a threat of violence, or being subjected to sexual harassment.
There has also been a revised definition of “Reasonable Management Action”. This covers any “management action” by the employer and is not limited to a list of actions. A psychological injury will not be accepted where the injury was caused by:
- Management action that is considered reasonable to the common person AND reasonable in all the circumstances.
- The expectation of the worker regarding the management action.
- The perception of the worker regarding the management action.
Examples of reasonable management action include appraisal of or feedback about the worker’s performance, and promotion of the worker, including a worker being unsuccessful in a promotion.
For primary psychological claims cause by “relevant conduct”, a new pathway applies – the liability determination is extended to 42 days, otherwise the claim is deemed accepted.
During the 42 days:
- The worker receives interim weekly payments at 75% PIAWE.
- The worker also receives interim medical expenses up to the set limit of $7500.
- If the claim is accepted, the insurer must back pay any difference and reimburse reasonable medical expenses.
Weekly payments for psychological injury claims have also reduced from 260 weeks to 130 weeks, unless the worker has 21% whole person impairment (WPI).
From 1 July 2026, a psychological injury must reach at least 25% WPI (up from 15%) to access weekly benefits beyond 130 weeks, and to pursue work injury damages. The required WPI% will continue to increase until 2029 to at least 29%.
This focus on psychological injury claims could be due to the increase in such claims. Over the 10 years to 2023-2024, serious claims for work related mental health conditions experienced the largest change of any nature of injury major group, up by 10,900 (or 161.1%).
Treatment Approval
Currently treatment is approved by insurers if it is “reasonably necessary”. This will be changing from 1 October 2026, with the requirement needed for treatment approval it must be considered “reasonable” and “necessary”. This definition is the same as what is used in NSW CTP. This change will mean that treatments must meet both definitions of “reasonable” and “necessary” for it to be approved.
The scheme will also exclude certain alternative therapies, wellness services, recreational or social activities, and companion animal services, subject to limited exceptions.
If you would like more information on these changes or would like guidance on how to respond to a workers compensation claim within your workplace, contact us via the link below.