Workers Compensation Reform FAQs

The primary purpose of the reforms is to ensure the workers compensation scheme's long-term sustainability and its continued support for workers and employers into the future. These reforms affect how injuries are assessed, how claims are managed, how disputes are managed, available entitlements and the support available to workers with an injury.

The NSW Parliament has passed legislation to reform the NSW workers compensation scheme.

Some reforms commenced on 27 March 2026. Further significant reforms commenced on 1 July 2026, supported by updated Workers Compensation Regulations and Workers Compensation Guidelines (see below or further detail).

Changes to the reasonable and necessary test and commutations commenced on 1 October 2026.

Further changes to permanent impairment assessments are expected to commence in mid-2027. More information about each reform is provided below.

No. The majority of the reforms apply to most workers covered by the NSW Workers Compensation Scheme. However, some changes do not apply to certain worker groups, including exempt workers, coal miners, volunteers or claims for dust diseases.

For exempt workers (i.e. police officers, paramedics and firefighters), the primary change is the introduction of the reasonable and necessary test for a treatment or service (including medical or related treatment, hospital treatment, ambulances services or workplace rehabilitation services) that commenced on 1 October 2026. The move from biannual to annual indexation will also apply to workers compensation benefits payable to exempt workers.

More details are provided under the relevant questions below.

A primary psychological injury is only compensable if:

• it is caused by one or more relevant events,
• the relevant event has a real and direct connection to employment, and
• employment is the main contributing factor to the injury.

Relevant events include:

• Relevant Conduct Events
  • sexual harassment
  • racial harassment
  • bullying
  • excessive work demands.
• Other Relevant Events (excluding relevant conduct)
  • acts or threats of violence
  • indictable criminal conduct
  • witnessing traumatic incidents
  • vicarious trauma.

Generally, psychological injuries caused by interpersonal conflict, work stress or events that are not defined as relevant events are not compensable.

No.

The psychological injury changes do not apply to exempt workers, coal miners or volunteers. This means the new rules for primary psychological injuries, including the eligibility requirements, claim pathways and entitlement changes, do not apply to these groups.

Exempt workers include:

• police
• paramedics
• firefighters, including firefighters employed by Forestry Corporation of New South Wales, the National Parks and Wildlife Service, and Transport for NSW.

Claims involving bullying, sexual harassment, racial harassment or excessive work demands are known as relevant conduct claims and follow a specific claims pathway.

For these claims:

• workers must submit a claim form
• insurers have 42 days to determine liability
• workers may receive interim weekly payments at 75% of their pre-injury average weekly earnings (PIAWE) while liability is being assessed
• workers can access up to $7,500 for medical and related treatment during this period.

If the insurer disputes liability, the worker must request an internal review by the insurer before the matter can be referred to the Industrial Relations Commission (IRC) or Personal Injury Commission (Commission).

If the dispute is not resolved through the internal review process, the worker may then refer the matter to the IRC (for disputes about whether conduct meets the definition of relevant conduct under the legislation), or the Commission (for all other disputes).

The reasonable management action defence has been expanded and clarified to better define which types of employer actions may be considered reasonable in psychological injury claims.

A broader range of employer actions can now be considered reasonable management action, provided they are carried out in a reasonable way. Examples include:

• managing absences from work
• giving performance feedback or counselling
• investigating misconduct
• suspending or standing down a worker
• allocating or changing duties
• addressing behavioural issues
• implementing workplace policies or procedures.

The defence can now apply where reasonable management action was the significant cause of the injury, even if it was not the only or predominant cause.

The reforms have also introduced an objective test for determining whether bullying, harassment or excessive work demands occurred.

Both the worker and the employer must provide relevant information within the required timeframes to help the insurer verify the circumstances of the claim. How the claim is decided will depend on the information available to the insurer. For example:

• If the worker does not identify a relevant event or does not provide sufficient information to show the injury was caused by a relevant event (including relevant conduct), the claim may not meet the requirements for compensation.
• If the worker provides sufficient information to show the injury was caused by a relevant event, and the employer does not provide sufficient information within the required timeframe to show that the significant cause of the injury was reasonable management action carried out in a reasonable way, the claim may be accepted.

If the insurer cannot determine eligibility for a relevant conduct claim based on the initial information received, it has 42 calendar days to investigate the claim and determine liability.

During this assessment period, workers may receive interim entitlement payments, including:

• weekly payments at 75% of their pre-injury average weekly earnings (PIAWE)
• up to $7,500 for medical and related treatment.

These payments are subject to the legislative requirements.

These arrangements only apply to relevant conduct claims and do not apply to exempt workers, such as police, paramedics and firefighters.

If the insurer accepts a relevant conduct claim, it has 21 days to adjust and backpay weekly payments up to 95% of the worker's pre-injury average weekly earnings (PIAWE).

The insurer must also reimburse reasonable and necessary medical and related treatment expenses.

If the insurer disputes a relevant conduct claim, it will issue a section 78 notice explaining the reasons for the decision.

The worker must request an internal review by the insurer before the matter can be referred to the Industrial Relations Commission (IRC).

If the dispute is not resolved through the internal review process, the worker may then refer the matter to the IRC if the claim was denied because the insurer determined that the injury was not caused by bullying, harassment or excessive work demands that meet the legislative definition of relevant conduct. All other disputes may be referred to the Personal Injury Commission.

The Industrial Relations Commission (IRC) is only involved in disputes about whether conduct meets the legislative definition of relevant conduct. For example, the IRC may be asked to decide whether conduct amounts to bullying, sexual harassment, racial harassment or excessive work demands under the legislation.

Before a matter can be referred to the IRC:

1. The insurer must assess the claim and make a decision (within 42 days).
2. If the claim is denied, the worker must request an internal review by the insurer.
3. If the dispute is not resolved through the internal review process, the matter may then be referred to the IRC.

The IRC's role is limited to deciding whether the conduct meets the legislative definition of relevant conduct. In making its decision, the IRC may consider evidence provided by the insurer, including whether the conduct was reasonable management action carried out in a reasonable way.

A worker cannot lodge an application with the Personal Injury Commission (Commission) to resolve a dispute about relevant conduct until the IRC has made its decision.

For other workers compensation disputes, the matter may be referred to the Commission.

More information about ‘Workplace Conduct Proceedings’ dispute pathway can be found on the IRC’s website.

Yes.

The reforms allow interim support while a relevant conduct claim is being assessed or disputed.

• Interim weekly payments can be paid for a maximum of 56 calendar days from the date the claim was made.
• Eligibility for treatment is available up to $7,500, or 56 days after the claim was made, whichever occurs first.

For psychological injury claims involving relevant events such as violence, criminal conduct, witnessing a traumatic incident or vicarious trauma, if the insurer cannot determine eligibility based on the initial information received:

• it must start provisional weekly payments within 7 days, unless it has a reasonable excuse not to do so
• it may also pay up to $10,000 for reasonable and necessary medical and related treatment expenses.

Claims involving bullying, harassment or excessive work demands are relevant conduct claims and follow a different process. If the insurer disputes a psychological injury claim involving another relevant event, such as violence, criminal conduct, witnessing a traumatic incident or vicarious trauma, it will:

• issue a section 78 notice explaining the reasons for the decision, and
• advise the worker that they may seek an independent review of the decision before lodging a dispute with the Personal Injury Commission.

Yes.

For primary psychological injuries notified on or after 1 July 2026, changes have been made to weekly payments, medical and related treatment entitlements, and access to work injury damages.

If the injury results in time away from work:

• weekly payments may be paid for up to 130 weeks, unless the worker meets the criteria for extended benefits
• reasonable and necessary medical and related treatment may be covered for up to one year after weekly payments cease, unless the worker meets the criteria for extended benefits, including the required Whole Person Impairment (WPI) threshold.

The WPI thresholds for extended benefits increase over time:

• 25% WPI for injuries notified on or after 1 July 2026
• 27% WPI for injuries notified on or after 1 July 2027
• 28% WPI for injuries notified on or after 1 July 2029.

Additional support is also available beyond 130 weeks for workers assessed at 21% WPI or above, but who do not meet the threshold for extended benefits. This includes:

• an additional year of weekly payments and medical and related treatment
• access to targeted vocational support.

A worker with an accepted psychological injury claim may be able to pursue work injury damages if:

• the psychological injury was caused by the employer’s negligence, and
• the worker meets the required Whole Person Impairment (WPI) threshold.

The required WPI threshold increases over time:

• 25% WPI for injuries notified on or after 1 July 2026
• 27% WPI for injuries notified on or after 1 July 2027
• 28% WPI for injuries notified on or after 1 July 2029.

Workers who notified a psychological injury before 1 July 2026 are generally assessed under the previous arrangements.

They:

• continue to have access to the existing 15% Whole Person Impairment (WPI) threshold for work injury damages (WID) claims, and
• may be entitled to resume weekly payments if:
  • weekly payments previously ceased because they did not meet the existing 21% WPI threshold at 260 weeks, and
  • a later assessment determines they have reached that threshold.

If these requirements are met, weekly payments become payable again from the date of the later assessment.

The NSW Chief Psychiatrist is reviewing the Psychiatric Impairment Rating Scale (PIRS) to determine whether it is the appropriate tool for assessing Whole Person Impairment (WPI) in workers compensation claims involving psychiatric and psychological conditions.

The review will consider the effectiveness and appropriateness of the PIRS and how it compares with other assessment tools within the workers compensation scheme.

The review is currently underway and a final report is due to be delivered in 2027.

SIRA will develop a return-to-work intensive program to provide vocational support and rehabilitation to workers with a primary psychological injury who have reached the end of the 130-week entitlement period and do not meet the threshold for extended benefits.

The program will be available to the worker for up to 12 months and may include the following types of supports:

• education and training,
• mentoring and on-the-job coaching,
• career counselling, and
• workplace facilitated discussion and mediation.

Workers with a primary psychological injury and an assessed Whole Person Impairment (WPI) of:

• 21 to 24% (from 1 July 2026)
• 21 to 26% (from 1 July 2027)
• 21 to 27% (from 1 July 2029)

may be eligible for:

• an additional 52 weeks at 60% of their pre-injury average weekly earnings (PIAWE) after the initial 130-week entitlement period (up to 182 weeks in total)
• a further year of reasonable and necessary medical and related treatment
• access to the return-to-work intensive support program for no more than 12 months (after the initial 130 weeks).

A permanent impairment assessment measures the degree of permanent impairment resulting from a relevant work-related injury or injuries. Under the reforms, workers are generally entitled to one assessment for an injury, or injuries, arising from the same incident. The reforms have introduced a new framework for obtaining a permanent impairment principal assessment. The framework has two stages.

1. From 1 July 2026, workers with an injury will only be eligible for one single assessment to determine the degree of permanent impairment resulting from their injury or injuries. This assessment is then used to determine all workers compensation entitlements, including weekly payments, medical expenses, lump sum compensation, commutations and work injury damages. Despite the single assessment rule, a further assessment may be undertaken in limited circumstances.
2. From mid-2027, an application will need to be made to SIRA for a principal assessment. SIRA will establish and maintain a public register of approved permanent impairment assessors and will appoint an approved assessor to conduct the principal assessment. Further information about the application process and register will be available closer to commencement.

If a worker has had one or more permanent impairment assessments before 1 July 2026, those assessments may be recognised as a pre-reform assessment. How they are treated depends on whether they have already been used to determine a worker's compensation entitlement.

If an assessment completed before 1 July 2026 has been used to determine entitlement(s):

A pre-reform assessment includes an assessment or agreement that was used to determine entitlement to weekly payments, lump sum compensation or work injury damages before 1 July 2026.

In these circumstances, the worker’s most recent assessment will be recognised as their single assessment.

If an assessment completed before 1 July 2026 has not been used to determine entitlement(s):

The assessment is not considered a pre-reform assessment and will not be recognised as the worker’s principal assessment.

The period between 1 July 2026 and the new framework for principal assessments commencing (mid-2027) is known as the interim period.

An interim period assessment is an assessment of the worker’s degree of permanent impairment conducted in the interim period by an assessor on the current list of assessors maintained by SIRA.

In the interim period, the permanent impairment assessment process has not substantially changed. The only change is that workers need to get legal advice before an assessment is undertaken.

An interim period assessment can only take place when:

• liability for the injury has been determined, and the worker has received independent legal advice to understand the full legal implications of the assessment
• the body systems or conditions being assessed are linked to the work-related injury
• the worker has reached maximum medical improvement
• all relevant medical information has been received.

The worker, with the assistance of their legal representative, decides when they are ready to request a permanent impairment assessment.

The insurer can no longer require or direct a worker to attend a Whole Person Impairment (WPI) assessment.

The assessments must be conducted by an assessor included on SIRA’s list of permanent impairment assessors.

During the interim period (from 1 July 2026 until the commencement of the permanent impairment principal assessment framework in mid-2027), assessments will continue to be conducted by assessors on SIRA's existing list of permanent impairment assessors.

From mid-2027, an application will need to be made to SIRA for a principal assessment. SIRA will establish and maintain a public register of approved permanent impairment assessors and will appoint an approved assessor to conduct the principal assessment.

Any Whole Person Impairment (WPI) assessment arranged by either the worker or insurer outside the legislated process cannot be funded.

Yes.

After a single assessment has been conducted, the worker and the insurer may enter into a permanent impairment agreement.

The assessment must be used to determine eligibility for:

• weekly payments
• medical expenses compensation
• lump sum permanent impairment compensation
• commutations
• work injury damages.

Despite the single assessment rule, a worker may have a further assessment in limited circumstances. A further assessment can take place even if a permanent impairment agreement has been entered into.

A further assessment may only be undertaken where there has been an unexpected and material deterioration in the worker's condition.

A further assessment can occur where:

• the worker and insurer agree there appears to have been an unexpected and material deterioration in the worker’s condition
• there was no reasonable cause to believe at the time of the original assessment that the worker’s condition would deteriorate, and
• the deterioration results in an increase in permanent impairment of at least a further 10 percentage points.

Before a further permanent impairment assessment can be undertaken:

• there must be evidence that the worker's condition has undergone an unexpected and material deterioration, typically supported by information from treating practitioners such as a GP or specialist
• the worker and insurer must agree that there appears to be an unexpected and material deterioration
• there must be evidence that the deterioration may result in an increase in permanent impairment of at least 10 percentage points.

Only after agreement is reached can a further permanent impairment assessment be undertaken.

An unexpected and material deterioration occurs where:

• there was no reasonable cause to believe at the time of the original assessment that the worker’s condition would deteriorate, and
• the deterioration results in an increase in the worker’s degree of permanent impairment of at least a further 10 percentage points.

Age-related deterioration must not be taken into account.

A worker can submit a request to the insurer for a further assessment. Along with the request, the worker should provide medical evidence that supports a claim of unexpected and material deterioration in their condition.

The insurer should respond to the request within 21 days. If the insurer does not respond, the request is taken to have been accepted.

A worker and insurer can update the original permanent impairment agreement based on the further assessment.

The reforms remove the previous restriction on access to lump sum compensation where permanent impairment resulted from voluntary sexual activity or illicit drug use.

• The test to determine whether the costs of a treatment or service (including medical or related treatment, hospital treatment, ambulance services, or workplace rehabilitation services) are compensable changed from ‘reasonably necessary’ to ‘reasonable and necessary’.
• Insurers must apply new rules when determining whether a treatment or service is reasonable and necessary.
• The rules require that a treatment or service must:
  • be for the primary purpose of treating the compensable injury,
  • be clinically justified for the treatment of the compensable injury,
  • be cost effective and represent value for money (i.e. the costs must be reasonable relative to the benefits achieved and the cost of alternative treatment or services).
• Specific treatments and services are not compensable, which means insurers cannot approve or pay for the following:
  • alternative health care treatments or services,
  • life and wellness coaching-related treatments or services,
  • energy and healing practice treatments or services,
  • massage and/or other general health, fitness or recreational activities (unless prescribed by a medical practitioner and determined by the insurer to be reasonable and necessary)
  • costs associated with companion animals (applies from 1 July 2026 and exemptions apply – see below).
• Where costs for services associated with a companion animal were approved by the insurer before 1 July 2026, claims for reasonable and necessary service costs for that companion animal can continue to be made.
• Costs of services associated with assistance animals are still compensable.
• A companion animal means a dog, cat or any other animals prescribed as companion animals under the Companion Animals Regulation 2018. All dogs are treated as companion animals, such as working dogs on rural properties, guard dogs, police dogs and corrective services dogs.
• An assistance animal means an animal referred to in section 9 (Disability discrimination - guide dogs, hearing assistance dogs and trained animals) of the Disability Discrimination Act 1992. This does not include a working dog.

The “reasonable and necessary” changes apply to all claims for treatment or services (including medical or related treatment, hospital treatment, ambulance services and workplace rehabilitation services) made on or after 1 October 2026.

These changes do not apply to claims for dust diseases.

Claims made for treatment or services before 1 October 2026 will be assessed using the ‘reasonably necessary’ test (the test that applied before 1 October 2026) where:

• the claim has been made but liability has not been finally determined by the insurer before 1 October 2026, and
• the claim has been approved by the insurer, but treatment has not commenced or has not been completed.

The “reasonable and necessary” changes apply to all workers, including exempt workers, coal miners* and volunteers*. The changes do not apply to dust disease claims.

* Different considerations apply for coal miners and volunteers, please talk with the insurer.

An employer or employer representative cannot attend a worker’s medical treatment or examination unless the worker specifically requests their attendance.

This change commenced on 1 July 2026.

Case conferences to support recovery and return to work may still occur but should be arranged separately from treatment or examinations unless the worker requests otherwise.

See the Reasonable and necessary changes section above for more information.

Insurer decisions about a worker's pre-injury average weekly earnings (PIAWE) are no longer considered work capacity decisions.

This means:

• insurers have greater flexibility to adjust PIAWE when new earnings information becomes available
• different notice requirements apply.

Despite this change, workers continue to have:

• the right to request an internal review
• the right to challenge a PIAWE decision through the Personal Injury Commission.

This change does not apply to exempt workers, coal miners, volunteers or claims for dust diseases.

Yes.

Penalties have increased for employers who fail to obtain the required workers compensation insurance.

Employers who don’t hold a valid workers compensation policy may face fines. The maximum penalties are:

• For large employers:
  • the greater of 3 times the avoided premium, or
  • a fine of up to $110,000,
  • and/or up to 2 years imprisonment.
• For other employers:
  • a fine of up to $55,000,
  • and/or up to 6 months imprisonment.

Providing incorrect wage information may result in an employer being under-insured. There is a new offence for recklessly failing to provide information relevant to premium calculation (under-insurance). The maximum penalties are:

• For large employers:
  • the greater of 3 times the avoided premium, or
  • a fine of up to $110,000,
  • and/or up to 2 years imprisonment.
• For other employers:
  • a fine of up to $55,000, and
  • up to 6 months imprisonment.

An enforceable undertaking is a legally binding commitment made by an insurer to take specific actions to address a breach, or alleged breach, of workers compensation legislation.

SIRA may accept an enforceable undertaking from an insurer as an alternative to prosecution in certain circumstances.

Providing an enforceable undertaking does not constitute an admission of guilt. An insurer must comply with the undertaking while it remains in force. Penalties may apply if an insurer does not comply.

The reforms introduce a temporary freeze on workers compensation premium rates for the 2026–27 and 2027–28 policy years. The premium rate freeze will only apply to the Nominal Insurer, icare.

Premium rates at a scheme level will remain at 2025–26 levels during this period.

However, an individual employer's premium may still change from year to year. This is because premiums are also influenced by:

• changes in wages or remuneration
• changes in business activities or industry classification
• the employer's claims experience
• eligibility for discounts, incentives or other adjustments.

The reforms introduce a fixed excess that employers must pay at the start of a claim involving weekly compensation payments.

The excess is equal to the amount of weekly compensation payable to the worker for:

• the first week in which the worker is entitled to weekly payments above $0, and
• the following week.

The new excess rules apply where:

• the worker receives weekly compensation payments, and
• the injury is covered by a workers compensation policy that was issued or renewed on or after 4:00pm on 30 June 2026.

For policies that were not issued or renewed on or after 4:00pm on 30 June 2026, the existing excess arrangements continue to apply.

The changes apply to all employers insured with the Nominal Insurer or a specialised insurer.

The employer excess does not apply to:

• journey claims
• recess claims
• employers who are not required to hold a workers compensation policy (because wages are $7,500 or less)
• domestic household policies
• exempt workers, including police, paramedics and firefighters.

Expanded access commutation pathway (from 1 October 2026)

Workers compensation reforms provide expanded access, for a limited period, to commutations for some workers who may not meet the eligibility requirements under the existing commutation pathway.

Under these reforms, you may be eligible to commute your claim even if you would not have met the eligibility requirements in the existing commutation pathway.

Who do these changes apply to?

These changes do not apply to coal miners, claims for dust diseases, or volunteer workers.

When do the changes start?

The Expression of Interest (EOI) process commences on 1 October 2026.

Agreement on permanent impairment

For all classes of cases, your degree of permanent impairment must be:

• assessed under the NSW Workers Compensation Guidelines for the Evaluation of Permanent Impairment, and
• agreed to by you and the insurer before compensation can be commuted.

You and your insurer are taken to have agreed on your degree of permanent impairment where:

• a medical assessor has issued a medical assessment certificate certifying your degree of permanent impairment; and
• the certificate is not the subject of an appeal when the commutation agreement is made.

Who is eligible?

There are three classes of cases that are eligible for commutation under the expanded access to commutations. Different eligibility requirements apply to each class as set out in the Part 9A of the Workers Compensation Regulation 2016. A worker’s claim may be eligible for commutation if they meet all of the eligibility requirements for a class of cases.

For work-related COVID-19 claims, the period of incapacity is now based on the period specified in the worker's certificate of capacity.

This means entitlement decisions relating to incapacity will be assessed using the period certified by the treating medical practitioner.

From 1 April 2027, workers compensation benefits will be indexed annually rather than twice yearly.

This change will introduce a single annual indexation process for relevant workers compensation benefits.

The Independent Legal Assistance and Review Service (ILARS), a service within the Independent Review Office (IRO), helps eligible injured workers access independent legal advice and assistance about their workers compensation rights and entitlements.

Further information about ILARS, including available assistance and how to access support, is available on the IRO website.

The reforms expand the role of the Personal Injury Commission (Commission).

The Commission can now:

• approve a commutation application (previously approved by SIRA)
• approve compromised lump sum death benefit settlements (coal mining matters continue to be handled by the District Court)
• appoint tutors for a person under legal incapacity
• prohibit or restrict publication of certain decisions.

The reforms expand SIRA’s functions by:

• giving SIRA the power to appoint or approve independent allied health consultants
• introducing a new offence for under-insurance and increased penalties for non-insurance
• increasing penalties for failing to provide suitable work.

An Injured Worker Advisory Group will be established to advise the Minister on matters relating to the needs of injured workers. The Advisory Group may give advice to the Minister about:

• the needs of people affected by serious work-related injuries
• the development and review of policies, practices and strategies for liaising with, and providing information to, injured workers, icare and SIRA
• other matters requested by the Minister.

The Advisory Group will be made up of:

• a chairperson (to be appointed by the Minister)
• three injured workers (to be appointed by the Minister)
• a member nominated by Unions NSW
• one member representing SIRA (to be nominated by SIRA)
• one member representing the IRO (to be nominated by the IRO).

Yes.

The reforms require that the Ministers responsible for the workers compensation legislation and the Treasurer must ensure the workers compensation scheme is independently reviewed by an expert panel and a report is provided to Parliament.

An expert panel will review the workers compensation scheme and the impact of the reforms as soon as practicable after 24 November 2027 (two years from the legislation passing).

This will be followed by a review conducted by a Joint Select Committee.