The laws for accessing compensation for a primary psychology injury have changed for all workers in NSW, except for coal miners, volunteers, and those defined as exempt workers which includes police officers, paramedics and firefighters.

Relevant events

From 1 July 2026, a psychological injury notified after this date is only compensable when it has been caused by one or more ‘relevant events,’ where there is a ‘real and direct connection’ between the ‘relevant event’ and the employment, and where employment is the main contributing factor to the injury.

Relevant events include:

• an act of violence or threat of violence
• indictable criminal conduct
• witnessing a traumatic incident happen or witnessing a dead or seriously injured person at the scene of a traumatic incident
• vicarious trauma
• sexual harassment
• racial harassment
• bullying
• excessive work demands, or
• another event prescribed by regulations.

Where the significant cause of the psychological injury was reasonable management action by the employer, no compensation is payable.

Disputes regarding psychological injury claims arising from relevant events may be heard in the Personal Injury Commission.

Relevant conduct

There is a new separate jurisdiction at the Industrial Relations Commission (IRC) to determine the occurrence of ‘relevant conduct,’ which is defined as bullying, excessive work demands, or racial or sexual harassment. The IRC has exclusive jurisdiction to determine whether conduct the subject of a claim is ‘relevant conduct’.

The Personal Injury Commission retains jurisdiction for all other disputes resulting from injuries caused by ‘relevant conduct,’ however, a worker must first make an application to the IRC for a determination as to whether ‘relevant conduct’ occurred.

Whole person impairment (WPI) thresholds for entitlements for a primary psychological injury

The whole person impairment thresholds for entitlements to weekly payments beyond 130 weeks and work injury damages claims relating to a primary psychological injury are changing as follows:

• at least 25% for a primary psychological injury notified or claimed from 1 July 2026
• more than 26% for a primary psychological injury notified or claimed from 1 July 2027
• at least 28% for a primary psychological injury notified or claimed from 1 July 2029.

Workers with a WPI of at least 21% may be eligible for a further 52 weeks of weekly payments at a reduced rate.

Medical and related treatment is limited to 12 months after weekly payments cease, except for workers with highest needs (>30% WPI).

There is no change to the threshold to access lump sum compensation for workers with a psychological injury, which remains at least 15% WPI.

There is a new single assessment process for determining the degree of permanent impairment for physical and primary psychological injuries.

Under these changes, only one assessment may be made in relation to the same injury or more than one injury arising from the same incident (called a ‘principal assessment’). This will be used to determine all entitlements, including weekly compensation, medical expenses, lump sum compensation, commutations and work injury damages.

Workers will only be allowed a further assessment where there has been an ‘unexpected and material deterioration’ in their condition, of at least a further 10% since their last assessment.

Eventually, these assessments will be conducted by a permanent impairment assessor on a panel coordinated by SIRA, but until then, the following will apply:

• Where a worker has already had an assessment of permanent impairment before 1 July 2026 (known as a ‘pre-reform impairment assessment’), including a medical assessment conducted in the Commission, it may be taken to be the worker’s ‘principal assessment’ for other entitlements. These workers must also make a claim for lump sum compensation before 1 July 2028.
• From 1 July 2026 until the SIRA panel is in place, the current process of an injured worker and insurer arranging separate assessments will likely continue as usual. The assessment must be undertaken by a SIRA-approved assessor, and a worker must receive legal advice before an assessment takes place. Following an assessment, the worker and insurer may enter into an impairment agreement.

Disputes relating to assessments of permanent impairment can be referred to the Commission for determination. This includes where a worker and insurer are unable to agree on the degree of permanent impairment or whether an ‘unexpected and material deterioration’ has taken place. The party bringing the dispute to the Commission must present medical evidence to support their position.

A decision about pre-injury average weekly earnings (PIAWE), which is used to calculate weekly benefit entitlements, is no longer defined as a “work capacity decision.” This means that a decision about a worker’s PIAWE will be a separate decision with a different notice period. Disputes about PIAWE may still be referred to the Commission for determination.

Changes under Division 1A of the Workers Compensation Act 1987 enable parties to settle claims for lump sum death benefits for deaths that occur on or after 1 July 2026, under the supervision of the Commission.

For a proposed settlement agreement to be lodged, a Form 2D and a reply must have been lodged with the Commission and liability must be in dispute. All dependents must be a party to the dispute and have legal representation.

The agreement will be considered by a member who was not involved in determining the initial liability dispute, and the outcome will be published in a written decision. They must be satisfied that there is a reasonable basis for the insurer to dispute liability, that the amount of compensation to be paid is reasonable in the circumstances, and that each dependant is a party to the agreement, or, if there are no dependants, the legal personal representative of the deceased is a party.

A new procedural direction is expected to be finalised the coming days and will be published on the Commission’s website. The Commission’s Pathway system will be updated to support the process of settlement of death benefits claims.

From 1 July 2026, insurers will need to certify the reasonable prospects of success and that the cost of the insurer’s action in commencing or defending the proceedings is proportionate to the claim and the significance of the issues in dispute when lodging an application or a reply with the Commission.

Some of the changes to workers compensation legislation will commence on 1 October 2026. These are detailed below and more information on these changes will be provided closer to the commencement date:

• Changes to the test for medical expenses and treatment: The test for an entitlement to medical or related treatment and domestic assistance will change from ‘reasonably necessary’ to ‘reasonable and necessary’.
• Commutations: The President of the Commission will have the jurisdiction to approve a commutation agreement, which is an agreement between a worker and insurer to settle a claim for workers compensation into a single lump sum payment. When a commutation is accepted and paid, a worker will have no further entitlement to payments for an injury, including weekly compensation and medical expenses.

The changes commencing on 1 July 2026 follow amendments to the Personal Injury Commission Act 2020 which included a new s 58A, which provides the Commission with the power to not publish or disclose a decision or information, and a new s 43A, which provides the Commission with the power to appoint a tutor. These commenced on 27 March 2026.

While these two changes were part of the workers compensation reform package, they apply to all divisions of the Commission. More information on these changes, including the supporting rules and procedural directions, is available here.