NSW Workers Compensation: What’s Changing

New Rules for Psychological Injury Claims

Claims for psychological injuries will be subject to new tests and conditions. Employees can now only receive compensation for a primary psychological injury if all three criteria are met:

• The injury was caused by a relevant event (e.g., bullying, sexual or racial harassment, violence, excessive work demands, traumatic incidents).
• There is a real and direct connection to employment.
• Employment is the main contributing factor to the injury.

Generalised allegations won’t be enough. Employees must detail the event and meet new objective standards. The Industrial Relations Commission will determine whether the alleged event actually occurred.

Overall, these new rules are likely to result in fewer claims being accepted.

What this means for you

• Clearer boundaries around what is and isn’t compensable.
• Stronger emphasis on reasonable management action – performance management, early return-to-work planning, restructuring, and disciplinary processes are protected when handled appropriately.
• An increased need for good documentation, early intervention, and robust anti‑bullying/harassment policies and processes.

New Employer Excess

Employers insured with icare or specialised insurers will pay a two‑week excess on claims involving weekly payments. This applies to policies issued or renewed after 4pm on 30 June 2026. The impacts of this include:

• A direct upfront cost when a worker goes on weekly benefits.
• A strong incentive to provide early suitable duties and prevent time off work.
• A greater focus on proactive WHS and psychosocial risk management.

Key Changes to Entitlements for Psychological Injuries

Key changes aim to reduce scheme costs and improve clarity. They include:

• Weekly payments capped at 130 weeks unless permanent impairment is 21% or higher.
• Up to 3.5 years of medical support even if the worker doesn’t meet whole‑person impairment thresholds.

To support employers through these workers compensation reforms, the NSW Government has announced a four‑year premium freeze for small businesses, starting 1 July 2026. This means eligible businesses will have their workers compensation premiums held at current levels until 2030, rather than facing annual increases.

The NSW Government estimates the premium freeze and reforms will save the average small business $12,000 over four years, but only if employers comply with new obligations.

If you’d like help advice regarding these changes, we’re here to help. Book in Now for a free Consultation (1300 474 672) and let us assist you.