In New South Wales, you may be eligible to claim workers compensation for mental health if your work caused psychological injury. With mental health issues on the rise, especially in young adults, it’s more important than ever to understand your legal rights and the support available to you.
Mental health challenges are projected to cost the Australian economy up to $220 billion each year. Beyond this staggering economic burden, the human toll is even more significant—impacting relationships, daily functioning, and quality of life for millions of workers and their families.
This article explains who qualifies for workers compensation for mental health conditions, what kinds of compensation and treatment you can access, and how the claims process works under current NSW law.
Mental Health Claims Are Rising — And So Are the Stakes
Serious workers compensation claims related to mental health now exceed 10% nationwide, having nearly doubled over the last ten years. This rise reflects greater awareness, increased workplace pressures, and the growing recognition that psychological injuries are just as serious, and often more disruptive, than physical ones.
Consider these key facts from Safe Work Australia’s September 2024 report:
| Mental vs Physical Injury | Mental Health Claims | Physical Injury Claims |
| Average time off work | 37 weeks | 8 weeks |
| Median compensation amount | $65,402 | Around $15,000 |
Employees in sectors like emergency response, education, and healthcare face a higher risk of work-related psychological injuries. However, anyone exposed to a toxic workplace, bullying, or unmanaged stress may be at risk. That’s why understanding how workers compensation for mental health applies to your situation is crucial.
What Mental Health Conditions Are Covered?
To claim workers compensation for a mental health issue, your condition must be diagnosable, work-related, and not caused by reasonable management action. Here’s how this breaks down:
Must-Have Criteria
- A recognised psychiatric diagnosis — such as depression, anxiety disorder, PTSD, or adjustment disorder, as outlined in the DSM-5.
- Substantial workplace connection — the work must be a major contributing factor to your mental health condition.
- Not exempted due to management action — claims may be rejected if your distress stems from reasonable disciplinary or performance measures.
Covered Mental Health Conditions
- Post-Traumatic Stress Disorder (PTSD)
- Clinical depression
- Generalised anxiety disorder
- Adjustment disorders
- Psychological conditions that emerge as a result of a prior physical injury.
Each case is assessed individually, so clear medical evidence and a timeline of workplace events are essential.
What Causes Work-Related Mental Health Issues?
Psychological injuries at work can stem from a wide range of stressors. According to the World Health Organization, these include:
- Workplace bullying or harassment – ongoing humiliation, exclusion, or intimidation
- Traumatic incidents – such as witnessing accidents, violence, or death
- High workloads – unrealistic deadlines or chronic understaffing
- Toxic work culture – lack of support, discrimination, or unsafe environments
- Occupational violence – especially in healthcare, education, or law enforcement
- Job insecurity – including casual contracts, restructures, or redundancies
It’s often the prolonged exposure to these stressors that leads to lasting psychological harm.
Steps to File a Workers Compensation Claim for Mental Health in NSW
Navigating the system can be complex — but understanding the key steps can give you a head start.
Get Diagnosed by a Specialist
See a qualified psychiatrist or psychologist who can provide a diagnosis and link your condition to workplace factors. A Certificate of Capacity will be required.
Notify Your Employer
Let your employer know as soon as possible — ideally in writing. This starts the official trail and is essential for your claim.
Lodge the Claim
Submit the completed worker’s injury claim form along with:
- Certificate of Capacity
- Medical reports
- Evidence of workplace incidents (emails, complaints, etc.)
- Personal statement detailing your experience
Your employer is required to send your claim to their insurer within 7 days of receiving it.
Insurer Assessment
The insurer must assess and decide on your claim within 21 days. They may:
- Request independent medical reviews
- Interview you and others
- Review workplace policies and past reports
Expect a detailed investigation — especially for psychological claims.
What Benefits Can You Receive?
If your claim is approved, you may be entitled to several types of support. Here’s what’s commonly available:
Weekly Compensation Payments
| Timeframe | Payment Amount |
| First 13 weeks | Up to 95% of pre-injury earnings |
| Weeks 14 to 130 | Up to 80% (conditions apply) |
| Beyond 130 weeks | You may still be eligible for benefits provided you meet specific incapacity requirements. |
Medical and Treatment Support
- Psychiatry and psychology sessions
- Medication
- Rehabilitation or return-to-work services
Lump Sum for Permanent Impairment
If your condition is stabilised and assessed as 15% or more Whole Person Impairment (WPI), you may be eligible for a lump sum.
Can You Sue Your Employer?
If your mental injury is serious and resulted from your employer’s negligence, you might qualify for a work injury damages claim (or common law claim). To qualify, you need:
- 15% WPI or more
- Proof that your employer failed to ensure a safe work environment
- Prior acceptance of lump sum compensation
These claims can result in additional compensation for:
- Loss of past and future income
- Reduced earning capacity
- Economic hardship
Successful cases have resulted in payouts of hundreds of thousands of dollars.
Why Mental Health Claims Are More Likely to Be Rejected
Psychological injury claims tend to be denied more often compared to those for physical injuries. Here’s why:
| Challenge | Explanation |
| Invisible injuries | No visible signs like a broken bone |
| Complex causation | Mental health often has multiple contributing factors |
| ‘Reasonable management action’ rule | Claims denied if linked to lawful performance reviews |
| Lack of evidence | Documentation and professional diagnosis are essential |
| Social stigma | Misconceptions can influence employer or insurer responses |
That’s why preparing your claim with expert legal guidance and thorough documentation makes a real difference.
Tips to Strengthen Your Workers Compensation Mental Health Claim
Here’s how to build a solid case and protect your entitlements:
- Act early: Report symptoms and get treatment as soon as possible.
- Get professional support: Secure a diagnosis and ongoing care from a registered mental health professional.
- Document everything: Keep a record of incidents, communications, symptoms, and their impact on your life.
- Follow your treatment plan: Consistency shows that your injury is genuine and ongoing.
- Consider legal representation: A workers compensation lawyer can identify weak spots and push back against unfair denials.
Mental Health in the Workplace: The Hidden Cost
The Productivity Impact
Mental health disorders cost the global economy an estimated $2.5 trillion in 2010—projected to reach $6.1 trillion by 2030. Most of this cost stems from diminished productivity rather than healthcare expenses.
Workers experiencing depression show significantly reduced performance, with productivity drops of 35% or more in some studies.
The Mind-Body Connection
Mental and physical health are inseparable. People with serious mental health conditions live 10-25 years less than average—not primarily from mental illness itself, but from untreated physical conditions like heart disease, diabetes, and cancer.
Research shows that about 10% of the connection between mental and physical health (and vice versa) happens through everyday activities. The biggest factor? Physical activity, which accounts for 77% of this connection. Simply put, when we’re mentally unwell, we often move less—and this lack of movement hurts our bodies. Social connections matter too, accounting for about 13% of this relationship.
Understanding the connection between mental and physical health enables claims managers to develop more effective return-to-work strategies, potentially reducing claim duration and improving outcomes for all parties.
Planning a Return to Work
Successfully re-entering the workforce after a psychological injury requires thoughtful planning and proper assistance. Things to consider include:
- Gradual return-to-work plans: A staggered return—starting with reduced hours or fewer responsibilities—allows you to adjust at a manageable pace. This phased approach helps rebuild confidence and reduces the risk of relapse.
- Adjusting your duties to minimise triggers: Specific tasks or workplace conditions may have played a role in your injury.
- Employer support and accommodation: Your employer has a legal obligation to provide reasonable accommodations. This may include flexible work arrangements, mental health support services, or adjustments to workload or supervision methods.
- Ongoing mental health treatment: Continued therapy, counselling, or psychiatric care is often essential during reintegration. Staying connected with your treatment team ensures your recovery stays on track while navigating the pressures of returning to work.
Employers are legally required to assist in your recovery and provide suitable duties where available.
Key Legal Updates You Should Know
Elisha v Vision Australia High Court Ruling
In Elisha v Vision Australia Limited [2024] HCA 50, the High Court allowed an employee to recover damages of $1.44 million for psychiatric injury caused by his employer’s breach of contractual disciplinary procedures during termination. This opens new legal avenues for those harmed by workplace processes that were mismanaged or poorly handled.
Urgent Reform Ahead for Mental Health Claims in NSW
NSW’s workers compensation system is under pressure. Projections show that there could be 80,000 new mental health claims in five years, and premiums may rise 36% by 2027–28 without reform. To manage the growing demand, the government plans to:
- Engage the NSW Industrial Relations Commission sooner in cases involving workplace bullying or harassment.
- Clarify what qualifies as a psychological injury and what constitutes fair management
- Bring NSW in line with other states on impairment assessment standards
- Strengthen fraud protections
- Implement important suggestions from the Safe Work NSW review
However, some implications arise:
- By involving the NSW Industrial Relations Commission earlier in bullying and harassment claims, workers may face delays in accessing compensation.
- Clearer definitions of psychological injury and management action could create stricter eligibility criteria
- The adoption of national standards for impairment assessments may increase the burden of proof for workers.
These changes could ultimately impact workers’ ability to successfully claim compensation for mental health-related injuries.
Conclusion
Claiming workers compensation for mental health in NSW is entirely possible — and increasingly common — but it does require evidence, persistence, and support. Psychological injuries can be just as debilitating as physical ones, and the law recognises this. By understanding your rights, documenting your condition thoroughly, and seeking early intervention, you can protect your health and your financial future.
We Help You Maximise Compensation
At Gajic Lawyers, we understand that after a psychological injury, your focus is on healing—not chasing paperwork or dealing with insurers. With over 40 years of experience and a No Win No Fee approach, we make the legal process easier, clearer, and more effective. You won’t get vague promises—just real action, clear advice, and a commitment to your recovery.
Here’s what you can expect with us:
- A smooth, streamlined workers compensation process
- Expert advice tailored for your mental health claim
- Consistent updates
- No upfront costs
- A dedicated team that fights for maximum compensation
- Compassionate support from experienced lawyers who genuinely care
Get in touch with one of our expert Workers Compensation Lawyers Parramatta or Workers Compensation Lawyers Cabramatta for a FREE consultation today.
