Changes to the NSW workers’ compensation scheme will have a profound effect on those suffering psychological injuries at work.

The legislation changes how psychological injury claims are assessed and compensated, making it harder for a worker to prove their case.

Before the reforms, a worker with a psychological injury could access certain long-term benefits if they had at least 15 per cent Whole Person Impairment (WPI). The reforms increase that threshold to 25 per cent from July 2026, with further increases scheduled to over 26 per cent in 2027 and at least 28 per cent in 2029.

This is significant because psychiatric WPI assessments above 25 per cent are relatively uncommon. Many workers who are unable to return to work may nevertheless fall below the new threshold and therefore lose entitlement to extended benefits.

Critics of the reforms, including the PSA CPSU NSW, argue that this will leave injured workers without adequate support.

While the State Government argues the changes are needed to control rapidly growing claim costs and maintain scheme viability, others are not impressed. Unions and other worker advocates say it will deny assistance to those who need it.

There will be no provisional claims and no claim is dated until the paperwork has been completed. PSA CPSU NSW Lawyers have found not one claim has been accepted since 1 July 2026.

In addition, the new rules broaden the definition of “reasonable management action”. Historically, employers could defend claims arising from reasonable actions such as performance management or disciplinary processes. However, broadening this definition may make it harder for workers to claim for psychological injuries that stem from workplace bullying, excessive workloads, conflict at work, stressful management processes, or cumulative workplace stress.

While some categories of workers, including Police Officers, Firefighters and Paramedics, are treated differently under parts of the reforms, Prison Officers are lumped in with other workers. This is despite them performing the same type of work as all three of the aforementioned frontline workers. So if a worker is employed at the Rural Fire Service, they are covered if they are in the field, but not if they work in the office at RFS.

The NSW workers’ compensation system underwent major reforms in late 2025 and early 2026. In addition to the changes to psychological claims, workers will find it harder to qualify for long-term benefits, as the threshold for accessing weekly compensation payments beyond 130 weeks is being increased over time.

Previously, workers with a lower level of permanent impairment could continue receiving benefits for longer. Now, higher WPI percentages will be required to qualify for extended support.

In practice, this means some workers with serious but not catastrophic injuries may lose access to long-term income support sooner than they would have under the previous rules.

This goes against the principle of accepting medical advice. Rather than accepting medical timelines, it creates a hard barrier for return to work regardless of advice.

The reforms gradually raise the impairment thresholds that workers must meet before becoming eligible for certain lump-sum compensation payments and work injury damages claims.

That generally means fewer injured workers will qualify for these payments, while some workers who previously would have been eligible may no longer meet the threshold. Larger claims will become concentrated among workers with more severe permanent injuries.

While access is becoming more restrictive for some workers, those with very high levels of permanent impairment may receive longer periods of weekly benefits. For example, workers above specified WPI thresholds become eligible for additional weeks of compensation under the reforms.

The Government claims reforms are designed around earlier recovery, rehabilitation, and return-to-work outcomes. However, unions such as the PSA CPSU NSW believe this is a heartless decision designed to stop claims, not support workers. The fund may have been at risk of default but every concern the Unions had raised about insurance wastage, management issues and other improvements to limit claims or get workers back to work quicker and cheaper were either discounted or ignored. This option punishes workers while protecting insurance agencies’ bottom lines. It’s not a workers’ comp scheme, it’s a government-run protection racket for insurance companies and bad management.

If you’re a NSW worker with an existing workers’ compensation claim, are considering lodging a claim, has a psychological injury claim, or may have a permanent impairment assessment coming up, you should contact your union for assistance.