Major reforms to the NSW workers compensation scheme are progressing following the passing of two reform bills by Parliament in late 2025 and early 2026. 

While some details and commencement dates are still being finalised, the reforms will change how claims are assessed, the timeframes for insurer decisions, and some employer protections.

Understanding the direction of these reforms now can help businesses prepare.

Key Changes for Businesses

Psychological injury claims
Claims must now relate to a specific workplace event, being either:

• conduct event such as bullying or unreasonable work demands; or
• traumatic event such as workplace violence or a serious accident.

This excludes primary injury caused by interpersonal conflicts, work stress or an event that has not been defined.

New dispute pathways
Disputed claims will first undergo an internal review, then may be assessed by the Industrial Relations Commission, with unresolved claims determined by the Personal Injury Commission.

Return to work program
Introduction of an intensive return to work program that provides an extra year of medical benefits and income replacement.

Duration of payments
Limits the duration of payments for all but the most serious primary psychological injuries to a maximum of 130 weeks.

Impairment threshold
Increases the whole person impairment (WPI) threshold to 25% from July 1, before rising to 26% and landing at a total impairment threshold of at least 28% by July 2029.

Premium freeze
Workers’ compensation premiums will not change for the next two policy periods (2026-2027 and 2027-2028).

Decision timeframes
Insurers must decide conduct-based claims within 42 days, or the claim may be deemed accepted. Weekly benefits and medical expenses must be back-paid within 21 days once accepted.

Reasonable management action
Compensation won’t be payable where reasonable management action is the cause of the injury.

Entitlement thresholds
Long-term weekly payments now apply only for serious injuries, with additional weeks of benefits for higher impairment levels and updated medical expense rules.

Additional Scheme Changes

• A single Whole Person Impairment assessment process
• Review of the Psychiatric Impairment Rating Scale
• Broader access to commutation (lump-sum settlement)
• Annual indexation of entitlements
• The establishment of a new Workers Compensation bullying and harassment jurisdiction in the NSW Industrial Relations Commission (IRC)
• Mutual obligations on workers and employers to assist insurers gather the information necessary to decide eligibility for primary psychological injury claims, with more detail to be provided by the regulations and guidelines

When Will Changes Take Effect?

Commencement dates are yet to be confirmed. Implementation will occur in stages as regulations and guidance are finalised. Some changes will apply to new claims only, while others may also apply to existing claims.

What Businesses Should Do Now

While details are still being confirmed, businesses can start preparing by:

• Reviewing workers’ compensation policies and claims processes
• Ensuring managers understand performance management and documentation requirements
• Updating return-to-work plans and claims procedures

Need Support with Workers’ Compensation or Injury Management?

If you would like a review of your workers’ compensation arrangements or assistance with injury management and return-to-work planning, please contact MGA on 1800 888 479  or via the online enquiry form.