If you have suffered a workplace psychological injury in New South Wales, the laws that decide whether you can claim workers’ compensation have changed. The Workers Compensation Legislation Amendment Act 2025 and the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026, together with the Workers Compensation Legislation Amendment Regulation 2026 and the Workers Compensation Guidelines 2026, reshape how a workers’ compensation psychological injury NSW claim is assessed, managed, and paid.
For psychological injuries first notified to an employer on or after 1 July 2026, a new eligibility test applies. This guide explains what now constitutes a compensable psychological injury, what will change in the coming years, and what these changes mean if you are considering a claim.
Understanding the NSW Workers' Compensation Psychological Injury Reforms
Primary psychological injury claims have been one of the fastest-growing parts of the NSW workers’ compensation scheme. In the Treasurer’s Ministerial Statement to the NSW Legislative Council on 18 March 2025, the NSW Government reported that psychological claims made up around 12 per cent of total workers’ compensation claims but accounted for around 38 per cent of total scheme cost, and that the number of psychological injuries had doubled in six years.
In response, the NSW Parliament passed the Workers Compensation Legislation Amendment Act 2025 on 18 November 2025 (assented on 24 November 2025) and the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026 on 4 February 2026 (assented on 11 February 2026). The operational detail is set out in the Workers Compensation Legislation Amendment Regulation 2026 and the Workers Compensation Guidelines 2026, both of which were published on 26 June 2026.
Some changes commenced from 27 March 2026, including a Personal Injury Commission tutor scheme for people under legal incapacity, restrictions on publication of decisions, and a two-year freeze on the Nominal Insurer’s premium target collection rate. The most significant changes affecting workers with psychological injuries took effect from 1 July 2026 and apply to claims notified on or after that date. SIRA has consolidated its reform materials on the Workers’ Compensation Information Hub.
What Is a Primary Psychological Injury?
Under the reforms, a psychological injury is defined as a mental or psychiatric disorder that causes behavioural, cognitive, or psychological dysfunction. This can include depression, anxiety, post-traumatic stress disorder (PTSD), and adjustment disorders.
The legislation distinguishes between two categories. A primary psychological injury arises directly from your work and is not caused by a physical work injury. A secondary psychological injury develops as a consequence of, or secondary to, a physical work injury. For example, if you sustain a serious back injury at work and later develop depression because of chronic pain and loss of function, the depression is treated as a secondary psychological injury.
The new eligibility rules apply only to primary psychological injuries. Secondary psychological injuries continue to be assessed under the existing framework, so a worker with an accepted physical injury who later experiences depression, anxiety, or adjustment symptoms falls into a different category. For a broader overview of your entitlements, see our guide on claiming compensation for a psychological injury.
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The New Compensability Test for a Primary Psychological Injury
For a primary psychological injury notified on or after 1 July 2026 to be compensable, all three of the following must apply, as set out in SIRA’s Workers Compensation Reform FAQs.
- The injury must be caused by a relevant event or a series of relevant events as defined in the legislation.
- There must be a real and direct connection between the relevant event and your employment.
- Your employment must be the main contributing factor to the injury.
This is a materially different test from the previous approach, which did not require the injury to arise from a specific listed event. If your psychological injury was caused by something that is not on the list of relevant events, you will not be entitled to compensation under the new primary psychological injury pathway.
What Counts as a Relevant Event?
A relevant event is a workplace event specified in the legislation. SIRA’s psychological injuries guide for workers and employers lists the following as relevant events.
- Being subjected to an act of violence or a threat of violence.
- Being subjected to indictable criminal conduct.
- Witnessing a traumatic incident, or witnessing a dead or seriously injured person at the scene of a traumatic incident.
- Experiencing vicarious trauma, within a limited statutory definition.
- Being subjected to sexual harassment.
- Being subjected to racial harassment.
- Being subjected to bullying.
- Being subjected to excessive work demands, defined as demands beyond the requirements expected of your role that are repeated or persistent and not reasonable in all the circumstances.
The type of relevant event that caused your injury matters because it determines the path your claim takes and how liability is determined.
Traumatic Event Claims
Where the relevant event involves violence, threats of violence, indictable criminal conduct, witnessing a traumatic incident, or vicarious trauma, your claim follows the usual workers’ compensation process. Your employer must notify their insurer within 48 hours of becoming aware of the injury, and the insurer decides liability based on the evidence provided.
Conduct Claims: Bullying, Harassment and Excessive Work Demands
Where the relevant event involves bullying, sexual or racial harassment, or excessive work demands, a specific new pathway applies. Under the SIRA reform framework:
- You must complete and sign the SIRA Worker’s Injury Claim Form and provide supporting information for the claim.
- The insurer has 42 days to determine liability.
- While liability is being assessed, you can receive interim weekly payments at 75 per cent of your pre-injury average weekly earnings (PIAWE).
- You can access up to $7,500 in medical treatment during the interim period.
- If the insurer disputes whether the alleged conduct meets the statutory definition of bullying, harassment, or excessive work demands, and this is not resolved through internal review, the matter is referred to the Industrial Relations Commission (IRC).
If the IRC finds that relevant conduct did not occur, the compensation pathway on that ground stops. If the IRC finds that relevant conduct occurred, the claim proceeds through the workers’ compensation system, and other issues, such as reasonable management action and impairment, can then be addressed separately.
Reasonable Management Action
The reforms preserve and clarify the reasonable management action defence. Where the significant cause of your psychological injury was reasonable management action taken in a reasonable way, no compensation is payable. This can include lawful and reasonable performance management, disciplinary action, restructures, retrenchment, or dismissal.
Whether particular conduct is truly reasonable management action or crosses into bullying, harassment, or excessive work demands is often the central issue in these claims. This is why medical, workplace, and documentary evidence are so important.
Who Is Exempt From the New Rules?
The new eligibility rules for primary psychological injury do not apply to certain workers. Under SIRA guidance, exempt workers include:
- Police officers.
- Paramedics.
- Firefighters, including firefighters employed by Forestry Corporation of New South Wales, National Parks and Wildlife Service, and Transport for NSW.
- Coal miners.
- Volunteers.
For these workers, the existing framework continues to apply. If you are a serving or former police officer with a psychological injury, our team has specific experience with NSW Police workers’ compensation claims and can guide you through your entitlements.
Increased Whole Person Impairment Thresholds
One of the most significant changes for injured workers concerns how long weekly payments can continue and when work injury damages become available.
For a primary psychological injury notified from 1 July 2026, to continue weekly payments beyond 130 weeks (two and a half years), the worker must have a whole person impairment (WPI) of at least 25 per cent. That threshold then rises to more than 26 per cent for claims made after 1 July 2027, and to more than 28 per cent for claims made after 1 July 2029. You can read SIRA’s guidance on the assessment of permanent impairment for more detail.
There is no change to the WPI threshold for lump sum permanent impairment compensation for a primary psychological injury. That threshold remains at least 15 per cent WPI.
The Intensive Return-to-Work Program
Recognising that many workers will fall below the new 25 per cent threshold, the reforms also introduce an intensive return-to-work program for workers with a primary psychological injury and a WPI in a defined range. From 1 July 2026, the range is 21 to 24 per cent, then 21 to 26 per cent from 1 July 2027, and 21 to 27 per cent from 1 July 2029.
Eligible workers with a WPI of at least 21% may receive an additional 52 weeks of weekly payments (up to 182 weeks in total) after the 130-week mark, a further year of reasonable and necessary medical entitlements, and tailored vocational re-education and rehabilitation, including training, mentoring, coaching, and counselling.
Changes to Medical Treatment
The reforms tighten the medical treatment test from “reasonably necessary” to “reasonable and necessary,” so that treatment funded through the scheme aligns with value-based and evidence-based care.
For workers with a primary psychological injury, reasonable and necessary medical treatment can generally be funded for up to one year after weekly benefits cease. Workers with highest needs, meaning a WPI of more than 30 per cent, retain lifetime medical access.
The Psychiatric Impairment Rating Scale Review
The Chief Psychiatrist has been directed to review the Psychiatric Impairment Rating Scale (PIRS), which is used to assess WPI for psychological injuries. SIRA states that the review is considering how reliable, consistent, and robust the PIRS is relative to other tools, and whether it remains an appropriate measure of permanent impairment. A final report is due in 2027.
The outcome of the PIRS review may influence how psychological injuries are assessed in future, so if you are working through a claim now, this is worth keeping in mind.
What These Changes Mean for Your Claim
The reforms narrow the range of psychological injuries that will be compensable and lift the impairment thresholds required for ongoing benefits. In practical terms:
- The date your employer is first notified of your injury determines which rules apply. Injuries notified before 1 July 2026 continue to be assessed under the pre-reform framework.
- The category of your injury (primary psychological, secondary psychological, or a physical injury with psychological symptoms) will determine the pathway of your claim, the evidence you need, and the entitlements available.
- Detailed particulars, contemporaneous documentation, and strong medical causation evidence are more important than ever, particularly for bullying, harassment, and excessive work demands claims that may need to pass through the Industrial Relations Commission.
- Insurer decisions can be challenged through internal review, the Personal Injury Commission, the Industrial Relations Commission, and, in some cases, with legal representation funded through the Independent Review Office’s Independent Legal Assistance and Review Service (ILARS).
Given the complexity and the higher stakes, early legal advice is important. Strict time limits still apply under the Workers Compensation Act 1987 (NSW), so you should not delay if you think you may have a claim. It also helps to understand your rights as a worker in NSW before you engage with the insurer.
Key Takeaways
- From 1 July 2026, a primary psychological injury notified in NSW is only compensable if it arises from a listed relevant event, has a real and direct connection to employment, and employment is the main contributing factor.
- Relevant events include acts or threats of violence, indictable criminal conduct, witnessing a traumatic incident, vicarious trauma, sexual or racial harassment, bullying, and excessive work demands.
- Bullying, harassment, and excessive work demands claims follow a new pathway involving a 42-day insurer decision, interim payments at 75 per cent of PIAWE, up to $7,500 in interim medical treatment, and possible referral to the Industrial Relations Commission.
- Weekly payments for primary psychological injuries beyond 130 weeks now require at least 25 per cent WPI, rising to more than 26 per cent from 1 July 2027 and more than 28 per cent from 1 July 2029.
- The lump sum permanent impairment threshold for psychological injury remains at 15 per cent WPI.
- The new rules do not apply to police officers, paramedics, firefighters, coal miners, or volunteers, whose claims continue under the pre-reform framework.
Speak With Experienced Workers' Compensation Lawyers
The changes to how a workers’ compensation psychological injury NSW claim is assessed are significant, and every case turns on its own facts and evidence. If you have suffered a workplace psychological injury, or your existing claim has been affected by the reforms, we can help you understand where you stand and what steps to take next.
At Burke Mead Lawyers, our workers’ compensation team, led by Managing Director Emma Mead, an Accredited Specialist in Personal Injury Law and Nationally Accredited Mediator, has extensive experience assisting injured workers across NSW. To discuss your situation with our team, contact us today.
