Significant reforms to NSW workers’ compensation laws are here, and they will reshape how psychological injury claims are managed.
For employers, this means new compliance obligations, clearer definitions of workplace conduct, and tighter thresholds for claims.
Understanding these changes now will help you prepare policies, train managers, and reduce the risk of disputes.
The amended Bill is expected to pass the Upper House in February 2026. Here’s what’s changing:
Key highlights
- Clearer definitions: Psychological injuries now include objective tests for bullying, excessive work demands, racial and sexual harassment.
- Dispute resolution: Claims involving “relevant conduct” must go to the Industrial Relations Commission.
- Management action: Section 11A clarifies what counts as “reasonable management action.”
- Higher treatment threshold: Medical expenses must meet the stricter “reasonable and necessary” test.
- Payment caps: Weekly payments for psychological injuries limited to 130 weeks unless Whole Person Impairment (WPI) ≥ 21%.
- Simplified assessments: One principal WPI assessment by an approved assessor.
- Other updates: Reduced medical expense period for primary psychological injuries and provisions for negotiating lump sum death benefits in liability disputes.
What’s next?
With the legislation now passed by Parliament, focus shifts to implementation.
Employers should expect:
- Staged commencement: Reforms will roll out gradually, with specific start dates.
- New regulations: SIRA will develop regulations and guidelines to give effect to the changes.
- Ongoing updates: Further legislative adjustments may follow. We’ll keep you informed as these reforms take shape throughout 2026.
Implications for employers
Employers should review their workplace policies and practices to ensure compliance with the new definitions and thresholds.
Key actions include:
- Updating bullying and harassment prevention measures.
- Training managers on what constitutes “reasonable management action”.
- Preparing for stricter medical expense requirements and capped payment periods.
- Proactive steps now will help minimise disputes and support a safer, compliant workplace.
Need guidance on preparing for these changes?
Contact our team to discuss how these reforms impact your organisation and what steps you can take to stay compliant.
