If you’ve been putting off checking what the NSW workers compensation reforms mean for you, now’s the time. The changes stopped being “proposed” a while ago. As of 1 July 2026, they’re in force.
For most injured workers, nothing about your day-to-day claim changes overnight. But if you have a psychological injury, or you’re weighing up whether to notify one, the date on your paperwork now matters more than it ever has. This article walks through what actually changed, who it affects, and what to do if you’re not sure where you stand.
A quick recap: how we got here
The reform package arrived in two tranches:
- First, the NSW Parliament passed the Workers Compensation Legislation Amendment Act 2025, in November 2025.
- The second more substantial bill passed by the NSW Parliament was the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026, received Royal Assent on 11 February 2026.
Some administrative provisions commenced earlier in 2026, however the major entitlement reforms commenced on 1 July 2026.
For the legislative background, see our earlier pieces on the 2026 workers compensation reforms and the shift to the “reasonable and necessary” treatment test. This article picks up where those left off.
The big one: psychological injury thresholds
The headline change affects primary psychological injury claims. Previously, a worker needed to reach a 15% whole person impairment (WPI) rating to access lump sum compensation and work injury damages for a psychological injury. From 1 July 2026, that threshold rises to 25% WPI for claims notified on or after that date, climbing further to more than 26% from 1 July 2027 and more than 28% from 1 July 2029.
In plain terms: a much smaller number of workers with psychological injuries will meet the bar for lump sum payments and common law damages going forward. It doesn’t mean psychological injury claims have disappeared — weekly payments and medical treatment are still available below the threshold — but the pathway to a lump sum has narrowed considerably.
What about claims already in the system?
This is the question we’re fielding most right now. The reforms generally apply based on when the injury was notified, not when it happened or when it’s finally assessed.
Broadly:
- Notified before 1 July 2026, you’re generally assessed under the old 15% threshold.
- Notified on or after 1 July 2026, the new 25% threshold generally applies.
We say “generally” deliberately — transitional arrangements are rarely a single clean line, and there are carve-outs for particular claim types and exempt worker categories. This is exactly the kind of detail worth having checked against your actual claim file, not just the headlines.
Exempt workers are treated differently
Not everyone is swept up in the higher threshold. Police officers, paramedics and firefighters are classified as exempt workers under the NSW scheme, and they continue to operate under separate arrangements. The higher WPI threshold doesn’t apply to this group, who retain access to their existing psychological injury entitlements. If you fall into one of these categories, don’t assume the general reform commentary applies to you — check your specific position.
The 130-week cap on weekly payments
Alongside the threshold change, weekly payments for most primary psychological injury claims are now generally capped at 130 weeks. Workers will not be entitled to weekly compensation beyond that point unless their degree of permanent impairment is assessed at 21% WPI or greater. From 1 July 2026, workers assessed between 21% and less than 25% WPI may continue to receive weekly payments for up to 182 weeks, provided they either have no current work capacity or have returned to work for at least 15 hours per week and are earning at least $225 per week. Workers with higher levels of impairment may be entitled to ongoing weekly payments beyond 182 weeks, subject to the statutory requirements. Accordingly, it is important to obtain an impairment assessment and legal advice before assuming that weekly payments will cease at the 130-week mark.
Tighter tests for what counts as a compensable psychological injury
The reforms also sharpen the criteria for a claim to qualify in the first place. A primary psychological injury generally needs to arise from a relevant event with a real and direct connection to employment, where employment is the main contributing factor. Where a claim relates to bullying, harassment or excessive workplace demands, insurers may rely on a “reasonable management action” defence — broadly, that the injury arose from legitimate performance management or restructuring rather than unreasonable treatment. This defence isn’t new, but we expect it to be tested more often as claims move through the system.
One detail that hasn’t had much airtime: the Psychiatric Impairment Rating Scale (PIRS), used to measure psychiatric impairment, is itself under review by the Chief Psychiatrist, who must report on whether it remains a reliable measurement tool. If the review recommends changes, the assessment tool itself — not just the threshold — could shift again.
What this means if you already have a claim
If your psychological injury claim was notified before 1 July 2026, the law shouldn’t retrospectively strip away entitlements accrued under the old rules — but insurers don’t always apply transitional provisions the way workers expect. A few practical steps:
- Check the notification date on file, not just the injury date — this determines which rules apply.
- Don’t assume a knockback is final. If your claim is refused or a WPI assessment comes back lower than expected, you can seek a review — see how the Independent Review Office can help.
- Get your medical evidence in order. See our guide to medical evidence in NSW compensation claims.
- If you haven’t notified yet, don’t sit on it — every week’s delay pushes you closer to the staged cut-off dates.
What this means if you’re thinking about lodging a new claim
If you’re dealing with a workplace injury — physical or psychological — right now, the practical advice hasn’t changed much: report the injury to your employer promptly (see our guide on reporting a workplace injury), see your GP as soon as possible, and get a clear paper trail connecting the injury to your work. What has changed is the stakes attached to getting your psychological injury claim properly documented and assessed the first time, given the higher bar now in place.
Practical takeaways
- Psychological injury claims notified on or after 1 July 2026 face a 25% WPI threshold for lump sum compensation and work injury damages — up from 15%.
- The threshold is scheduled to rise further in 2027 and 2029.
- Exempt workers (police, paramedics, firefighters) are not subject to the higher threshold.
- Weekly payments for most primary psychological injury claims are generally capped at 130 weeks, with possible extensions for workers near the threshold.
- Which rules apply to your claim generally turns on the notification date, not the injury date.
- The PIRS assessment tool itself is under review and could change again.
- If you’re unsure where your claim sits, get it checked — don’t rely on general commentary (including this article) as a substitute for advice on your specific file.
Where Gajic Lawyers fits in
We’ve been running compensation claims in NSW for 30+ years, and reform years like this one are exactly when experienced advice earns its keep. We work on a No Win No Fee basis, offer a free consultation to talk through where you stand, and our fully paperless, technology-driven process means we can review your file, gather medical evidence and keep you updated without you needing to set foot in an office. Clients across Sydney and regional NSW work with us remotely, including by telemedicine, so distance from our offices is never a barrier to getting proper advice.
Get your claim checked before it’s affected by these changes
If you have a psychological injury claim in progress, or you’re thinking about lodging one, don’t guess at how these reforms apply to you. Call Gajic Lawyers for a free, no-obligation consultation, or get in touch through our contact page to arrange a time that suits you. We’ll look at your notification date, your medical evidence and your options, and explain it all in plain English.
