NSW Workers Compensation Reforms 2026: What to Know

If you are an injured worker in New South Wales — or you think you might become one — the rules that govern your claim are changing. The NSW workers compensation reforms 2026 are the most significant overhaul of the scheme in years. Some changes have already commenced. Others are to be proclaimed or roll out progressively from 1 July 2026. The practical effect is that how long you can be paid, what medical treatment will be funded, and whether you can pursue common law damages all depend on when you were injured and what type of injury you have. This article breaks it down in plain English.

What has actually changed, and when

The reforms arrived in two waves. The first, the Workers Compensation Legislation Amendment Act 2025 (NSW), was passed by the NSW Parliament on 18 November 2025. The second, the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 (NSW), passed the Upper House on 4 February 2026 and is progressing to Royal Assent as at the time of writing. A group of amendments from these Acts commenced on 27 March 2026, with further reforms scheduled to take effect progressively, including from 30 June 2026 and 1 July 2026 onwards.

The Government’s stated goal is to keep the scheme financially sustainable while directing more resources to return-to-work programs. According to SIRA and icare, psychological injury claims had been rising sharply and making up a disproportionate share of scheme costs. The reforms respond to that by tightening some entitlements for primary psychological injuries while keeping most physical injury entitlements largely intact.

The big change: how psychological injury claims are treated

The most significant reform is how claims for primary psychological injury are handled. Four key changes stand out: –

1. Weekly payments are capped at 130 weeks for most primary psychological injury claims. That is roughly two and a half years. After 130 weeks, a worker may only continue to receive weekly payments if their whole person impairment (WPI) is assessed at or above the new threshold for extended benefits.
2. The WPI threshold is rising, and in staged increments. For continued weekly payments beyond 130 weeks and for access to work injury damages (the common law damages claim against the employer) for a primary psychological injury, the threshold is moving to:
   • At least 25% WPI for injuries notified on or after 1 July 2026;
   • More than 26% WPI (in practical terms, 27% or above) for injuries notified on or after 1 July 2027; and
   • At least 28% WPI for injuries notified on or after 1 July 2029.

For primary psychological injuries notified before the new legislation commences, the existing 15% WPI threshold for work injury damages continues to apply. A much narrower band of workers will reach the new thresholds once they apply.

3. A new Return to Work intensive program has been introduced. Workers with a primary psychological injury who are assessed at 21% WPI or above — but below the upper threshold for extended benefits — may be eligible for an additional 52 weeks of weekly benefits (up to 182 weeks in total) at 60% of their pre-injury average weekly earnings (PIAWE) or the maximum weekly compensation amount, whichever is less. Eligibility is conditional either on minimum current weekly earnings (at least $225 per week) or on participation in a structured return-to-work program.
4. The “reasonable management action” defence in section 11A has been clarified. The reforms make express that compensation is not payable for a psychological injury where reasonable management action, taken in a reasonable way, was the significant cause of the injury. This is widely understood by commentators and scheme agents to strengthen the employer’s defence.

What is changing for physical injury claims

If you were injured physically — a back injury on a building site, hearing loss over years of exposure to noise, a crush injury while operating machinery — the core architecture of your claim is largely unchanged. You are still entitled to weekly payments, medical treatment, and, where the thresholds are met, permanent impairment compensation and, in appropriate cases, work injury damages.

But two changes affect all workers, including those with physical injuries.

1. The first is a shift in the medical treatment test. The old test required that treatment be “reasonably necessary.” The new test is that treatment must be “reasonable and necessary.” That small-sounding change tightens the threshold, and insurers are expected to apply it more strictly once commenced.
2. The second is the introduction of a single principal WPI assessment by an approved medical assessor for a given injury, to reduce duplicated medico-legal assessments. For workers who feel they have been assessed too quickly or on inadequate evidence, this makes getting the assessment right the first time more important than ever.

What this means if you already have a claim

The most common question we are being asked is a simple one: will these changes affect my existing claim?

The answer depends on the specific reform. Some changes apply only to new claims lodged after commencement dates. Others apply to both new and existing claims. In particular, the new WPI thresholds for psychological injury work injury damages and extended weekly payments apply to claims (or Pre-Filing Statements for damages) lodged on or after the relevant commencement dates. The existing 15% threshold is preserved for primary psychological injuries notified before the new legislation commences.

Practically, if you are on weekly payments now and you are approaching the 130-week mark with a primary psychological injury, you should seek advice immediately. There is a meaningful difference between ending payments because entitlements have run out and ending payments because an assessment was missed or made too late.

The Personal Injury Commission and the Chief Psychiatrist review

Two other parts of the reforms deserve attention:

1. The first is the expanded role of the Personal Injury Commission (PIC). Amendments to the Personal Injury Commission Act 2020 (NSW) commenced on 27 March 2026 to permit the President of the Commission to make orders restricting disclosure of decisions or the identity of parties and witnesses in appropriate cases, and to permit the Commission to appoint a tutor for a person under legal incapacity.
2. The second is the NSW Chief Psychiatrist’s review of the Psychiatric Impairment Rating Scale (PIRS). PIRS is the tool that currently determines WPI for psychological injuries, and it has long been criticised. The Chief Psychiatrist is required to report within 18 months of the date of assent on the effectiveness and appropriateness of PIRS and to recommend any alternative approach. The outcome could reshape how psychological injury WPI is measured for years to come.

The premium freeze — and why it matters to injured workers

From 30 June 2026 to 30 June 2028, icare — the Nominal Insurer that handles most NSW workers compensation policies — must not file premiums with SIRA that would increase the scheme’s target collection rate above the 2025–26 rate. Individual employer premiums may still vary due to changes in wages, business activity or claims experience.

For injured workers, the freeze is not direct relief. But it is context. The reforms were driven in part by projected premium rises (icare had forecast increases of up to 36% over three years without intervention). By holding premiums, the Government is signalling that the scheme is expected to absorb the cost of the new return-to-work programs and the narrower benefits for psychological injury claims. If you are an injured worker watching this space, expect insurers and case managers to be more active in pushing return-to-work plans, and more alert to claim duration.

Practical takeaways for injured NSW workers

• Report your injury to your employer in writing, promptly. Late reporting is one of the most common reasons claims are contested.
• If your injury is psychological, get specialist advice early. The new thresholds and the 130-week cap make the first six to twelve months of a claim the critical window.
• Keep a clear record of every treatment request and every insurer decision. Under the new medical test, documentation is your strongest protection.
• If your claim is near an important time limit — statutory or procedural — do not assume the insurer will warn you. Seek independent legal advice.
• Do not assume a denial is the end. There are review rights through the Personal Injury Commission, and the Independent Review Office (IRO) administers the Independent Legal Assistance and Review Service (ILARS) to help eligible injured workers.

How Gajic Lawyers can help

The 2026 reforms have made a complex scheme more complex still. For more than 30 years, our team has helped injured workers across NSW understand their entitlements, challenge unfair decisions, and recover what they are owed. We run claims on a No Win No Fee basis. We handle the paperwork through a fully paperless process, so you can run your claim from home, a hospital bed, or a regional town. Our in-house interpreter service, including Vietnamese, supports clients right across Western Sydney. If you are an injured worker wondering how these reforms affect you, speak to us before you sign anything from an insurer.

If the 2026 reforms have left you uncertain about your rights, we can help you make sense of them. Contact our team for a free, obligation-free consultation. Call (02) 9890 5885 or visit our NSW workers compensation page to start your claim.