Breaking News - Changes to NSW Workers Compensation

Proposed Changes to the NSW Workers Compensation Scheme

You have more than likely heard in the news that the NSW Government recently announced significant changes to the Workers Compensation scheme. The Workers Compensation Legislation Amendment Bill 2025 (NSW) (“the Bill has been proposed in an attempt to reduce the running costs, and improve the operative efficiency, of the scheme. However, there has been a lot of resistance from industry groups and lawyer advocates, as the proposed changes are likely to significantly affect the entitlements of injured workers.

What are the proposed changes?

The Bill proposed many changes to the entitlements of injured workers, with a particular focus on the response to psychological injuries in the workplace. The key changes include:

• Primary psychological injuries are only compensable if:

1. The injury is caused by a “relevant event”, such as: 

• An act or threat of violence.
• Indictable criminal conduct.
• A motor accident, a natural disaster, a fire or another accident.
• Witnessing a traumatic incident happen .
• Experiencing vicarious trauma.
• Being subjected to sexual harassment, racial harassment, bullying, or excessive work demands.

2. There is a real and direct connection between the event and the worker’s employment; and

3. Employment is the main contributing factor.

• For primary psychological claims arising out of sexual or racial harassment, bullying, or excessive work demands, the insurer must accept or dispute the claim within 42 days of the claim being lodged. During that determination period, the work is entitled to interim weekly payments and medical expenses.

• For claims arising out of a primary psychological injury, the permanent impairment threshold will be increased from 15%, to 25%. to be eligible for:

1. Weekly benefits after 130 weeks.

2. Lump sum compensation under the Scheme; or

3. To pursue a Work Injury Damages Claim (Common Law Claim),

This amendment is intended to come into effect in October 2025, and the threshold will then further increase to 31% in July 2026.

• The employer has a defence to a psychological claim where a significant cause of the injury was “reasonable management action” (as defined in the Bill) taken, or proposed to be taken, by the employer.

• For both psychological and physical injuries, medical expenses must be deemed “reasonable and necessary”, to be approved by the insurer.

• The insurer and the worker must agree upon one SIRA-appointed independent medico-legal expert, to assess the workers level of whole person impairment, for both psychological and physical injuries. A further assessment may only supersede the original assessment where the worker’s condition has deteriorated, to an increase of at least 10% whole person impairment or more.

• The worker must obtain legal advice and understand the implication of the assessment, prior to a permanent impairment assessment.

What happens next?

The Bill was introduced to Parliament on 27 May 2025. At this stage, the Bill is subject to the review process through Parliament, and any amendments, (and the commencement date of any amendments) are yet to be confirmed.

This means that the proposed changes outlined above, may or may not reflect the final legislative amendments. Further discussion and debate is expected to occur.

If you would like further information about the proposed Bill, or if you have an enquiry about how this may impact your Workers Compensation Claim, do not hesitate to contact our experienced Injury Compensation Team.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.