New South Wales introduces major workers’ compensation changes affecting claims, premiums and return to work

At a glance

• The New South Wales government has passed reforms to the workers compensation scheme primarily focused on psychological injury claims, limiting premiums and return to work outcomes for employees.
• The changes will come into place under the Workers Compensation Act 1987.

The New South Wales government has introduced a package of reforms to the workers’ compensation scheme, with major implications for employers, particularly in relation to psychological injury claims, premium settings and return‑to‑work arrangements.

The following changes to the Workers Compensation Act 1987 (New South Wales) will come into place shortly:

• Psychological injury claims: Weekly payments for most primary psychological injury claims will be limited to 130 weeks (other than permanent impairment claims). The whole person impairment threshold will increase to 25% from 1 July 2026, rising progressively to 28% by July 2029 although the Minister can reduce this if it is in the public interest to do so.
• Reasonable management action: Changes to the 'reasonable management action' defence so that the defence is now triggered if the management action is the significant cause of the injury.
• Premiums: Average premium increases will be capped for an 18‑month period.
• Return to work support: An intensive return to work programme will provide eligible workers with an additional year of medical treatment and income replacement benefits.

Employers can expect greater premium certainty with the changes, especially those with no or minimal prior claims and may see a reduction in the number of psychological injury claims given the more balanced approach to compensable injuries. However, employers should keep in mind the importance of early intervention, active return to work management, and robust psychological risk controls in the workplace.