Workers compensation legislation for psychiatric injury changes on 1st July 2026. Find out how these reforms affect your claim and what you need to do now.
The NSW State Government has passed sweeping reforms to workers compensation that will fundamentally change who qualifies for psychiatric injury claims and how much they can receive. If you or someone you know has sustained a psychological injury at work, the clock is ticking.
The amendments to the NSW workers compensation scheme provide a more limited and tightly defined coverage for psychiatric injuries, with eligibility restricted to serious event-based injuries and change of permanent impairment thresholds limiting access to compensation entitlements.
Key Summary
- The upcoming workers compensation reforms will affect what you can claim and how long you can receive benefits.
- Fewer psychological injury claims will qualify, with general stress and burnout no longer enough
- Primary psychological injuries are only compensable if they arise from a defined statutory “relevant event” (e.g. workplace bullying, sexual harassment, or exposure to a traumatic incident). General work stress and burnout will not qualify.
- The reasonable management action defence under Section 11A has been strengthened, making it harder to claim where management action is involved.
- The Whole Person Impairment (WPI) threshold to access permanent impairment compensation is set to rise from 15% to 25% from 1 July 2026, with further increases to follow year on year.
- Weekly payments for primary psychological injuries will generally cease after 130 weeks unless the worker meets the newly revised 25% WPI threshold.
- The test for medical expense coverage tightens from “reasonably necessary” to “reasonable and necessary.”
- A new Industrial Relations Commission (IRC) dispute pathway applies before matters can proceed to the Personal Injury Commission.
The window to act is closing fast with 1 July 2026 being closer than it seems. At Wyatts, we have a team of professional and experienced psychiatric and psychological injury lawyers specialised in making claims like yours. Contact Wyatts today at 1800 773 880 or get in touch here.
What Are The Legislative Changes?
In response to concerns about the sustainability of the workers compensation scheme associated with primary psychological injury claims, the NSW State Government has introduced the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026 (NSW), which will affect the current workers compensation legislation and regulations.
Compensation for primary psychological injuries
Primary psychological injuries are compensable only where the injury arises from a defined statutory ‘relevant event’. Examples of defined ‘relevant event’ include:
- Workplace bullying (as defined in the legislation)
- Sexual harassment
- Workplace violence or threats of violence
- Exposure to a traumatic incident, including witnessing death or serious injury
- Specified forms of vicarious trauma arising from the worker’s duties
General work stress, burnout, workplace dissatisfaction or interpersonal conflict will not, of themselves, satisfy the compensability test.
Reasonable management action – Amended of Section 11A of the Workers Compensation Act 1987
Section 11A of the Workers Compensation Act 1987 (NSW) has been amended so that compensation is not payable where the significant cause of a psychological injury is reasonable management action taken or proposed to be taken, or the worker’s perception or expectation of such action. This represents a stricter test and criteria to claim compensation for psychiatric injury.
Increased Whole Person Impairment thresholds
From 1 July 2026, workers with a primary psychological injury must be assessed as having at least 25% Whole Person Impairment (WPI) to access permanent impairment compensation or to commence a work injury damages claim. The former threshold was 15% WPI.
The legislation provides for staged increases to this threshold: more than 26% from 1 July 2027 and at least 28% from 1 July 2029.
You can only have one main Whole Person Impairment (WPI) assessment by an approved medical assessor. A second assessment is allowed only if you can demonstrate if your impairment is likely to increase by more than 10%.
Weekly compensation beyond 130 weeks
Weekly payments for primary psychological injuries generally cease after 130 weeks from the date payments are commenced. From 1 July 2026, extended weekly payments are available only where the worker has at least 25% WPI.
Changes to the legal test for Medical Expenses
The test for medical and treatment costs changes from ‘reasonably necessary’ to ‘reasonable and necessary’ requirement to have your medical expenses covered under workers compensation.
Dispute resolution and procedural changes
Under the NSW workers compensation reforms the Industrial Relations Commission of NSW (IRC) has been authorised to hear and determine matters in certain psychiatric injury claims arising only from ‘defined’ workplace conduct, particularly bullying and harassment.
The IRC must first determine whether alleged conduct meets a statutory definition of “relevant conduct” such as bullying or harassment, before a workers compensation dispute may proceed.
The IRC does not determine workers compensation claims, assess medical evidence or your capacity for work.
If your claim for ‘relevant conduct’ is successful, only then may the matter proceed to the Personal Injury Commission.
The Chief Psychiatrist
The State Government has also commissioned the Chief Psychiatrist in NSW to devise a system of psychiatric assessment in workers compensation claims, which is due in 2027.
Wyatts Is Here To Help!
The implementation of the above legislation and new regulations are currently being drafted and not available at this time. Wyatts Lawyers will endeavour to provide to you the best advice available at this time, support you on your legal journey and ensure you are not navigating these changing times alone.
At Wyatts, we have a team of professional and experienced psychiatric and psychological injury lawyers specialised in making claims like yours. They are ready to help advise and assist you in your legal claim. Contact Wyatts today at 1800 773 880 or get in touch here.
