NSW Workers Compensation Reform 2026: What Psychological Injury Claimants Need to Know

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NSW workers compensation law for psychological injury changed on 1 July 2026. The changes were made by the Workers Compensation Legislation Amendment Act 2025 (assented 24 November 2025) and the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026. For workers currently receiving treatment or income support for a psychological injury at work, here is what changes, what stays the same, and what to do if your claim may be affected.

What is changing from 1 July 2026?

The reform introduces three main changes that affect workers with primary psychological injury claims:

1. 130-week cap on weekly income replacement payments

Since 1 July 2026, section 39A of the Act generally ends weekly payments for a primary psychological injury after an aggregate period of 130 weeks (approximately 2.5 years). Before that date, section 39 ended weekly payments after an aggregate period of 260 weeks unless the degree of permanent impairment was more than 20%.

This cap applies to primary psychological injuries -- where the psychological condition is the main injury claimed. It does not apply to secondary psychological injuries (where a psychological condition develops as a consequence of a primary physical injury, for example depression developing after a serious back injury at work).

2. Higher Whole Person Impairment (WPI) thresholds for weekly payments and work injury damages

Section 39A does not apply if the degree of permanent impairment is at least 25%. For work injury damages (common law), section 151H now requires a degree of permanent impairment of at least 25% for a psychological injury; the version in force on 30 June 2026 required at least 15%. Further amendments to section 39B apply to later claims. This does not affect the lump-sum permanent impairment threshold, which stays at 15% WPI -- see the note below the table.

The lump-sum permanent impairment threshold is a separate figure and is unchanged by this reform -- it stays at 15% WPI for psychological injury. Do not confuse the two: a worker at 15-24% WPI can still be eligible for a lump-sum permanent impairment payment, even though they fall short of the higher threshold that governs weekly-payment continuation past 130 weeks and work injury damages / common law claims.

3. Extended weekly payments for higher-impairment workers

How the impairment bands work for a primary psychological injury:

• At least 21% but less than 25% WPI: section 39B allows weekly payments after the second entitlement period, up to an aggregate of 182 weeks, if the worker applies to the insurer and either has no work capacity, or has current work capacity, has returned to work for at least 15 hours per week and has current weekly earnings of at least $225 per week. The rate is the lesser of 60% of pre-injury average weekly earnings (PIAWE) or the maximum weekly compensation amount, less current weekly earnings in each case.
• At least 25% WPI: section 39A does not apply, so weekly payments can continue after 130 weeks (still subject to the other weekly payment rules), and the section 151H threshold for work injury damages for a psychological injury is met. (The lump-sum permanent impairment threshold is separate and stays at 15% WPI.)
• More than 30% WPI: a worker with highest needs (section 32A) is not subject to the section 59A time limit on treatment compensation.

Psychology treatment under the new rules

Psychology treatment during your claim

Section 59A does not cut off treatment while weekly payments are payable. Workers with an approved psychological injury claim can keep receiving funded sessions (at no out-of-pocket cost) during their weekly payment period. The SIRA gazetted rate for psychology sessions from 1 February 2026 is approximately $284.40 for an initial session (PSY301, up to 60 minutes) and $237.60 for a subsequent session (PSY302, also up to 60 minutes).

Treatment access after weekly payments cease

For a primary psychological injury first notified to the employer on or after 1 July 2026, section 59A of the Act limits compensation for treatment to a period of 1 year starting on the day weekly payments cease to be payable (or, if weekly payments are not payable or have not been paid, the day the claim was first made). This limit does not apply to a worker with highest needs. Section 32A defines a worker with highest needs to include a worker whose degree of permanent impairment has been assessed at more than 30%.

The claims process and treatment pathway

The pathway for starting treatment is: report your injury to your employer, get a GP certificate of capacity, have a SIRA-approved psychologist submit an Allied Health Treatment Request (AHTR) to your insurer, and receive funded sessions once approved. See the psychological injury claims guide for the full pathway.

What about claims lodged before 1 July 2026?

Claims lodged before 1 July 2026 may benefit from transitional provisions. The transitional rules are complex and depend on factors including the date the claim was lodged, whether a Pre-Filing Statement has been submitted, and the stage of any impairment assessment. Legal advice specific to your claim situation is essential if your claim pre-dates the reform.

If you have an active claim and are approaching a Whole Person Impairment assessment, seeking legal advice urgently is particularly important given the 1 July 2026 commencement date.

What does "reasonable management action" mean under the reform?

The reform changed both the gateway for a psychological injury claim and the exclusion for employer action. For a primary psychological injury (one that is not secondary to a physical injury), section 8O of the Workers Compensation Act 1987 (NSW) now says no compensation is payable unless a relevant event or a series of relevant events caused the injury, there is a real and direct connection between those events and the worker's employment, and employment is the main contributing factor to the injury. Relevant events are listed in section 8G. They include being subjected to violence or a threat of violence, bullying, sexual or racial harassment, or excessive work demands, and witnessing a traumatic incident. Whether a worker was subjected to bullying, excessive work demands or harassment is decided using an objective test (section 8L).

Section 11A was also rewritten. Before 1 July 2026 it excluded a psychological injury that was "wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer" with respect to matters such as transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal. It now says no compensation is payable for a psychological injury if the significant cause of the injury was reasonable management action taken or proposed to be taken by the employer, the worker's expectation of reasonable management action, or the worker's perception of reasonable management action. "Reasonable management action" is defined in section 8F as management action taken in a reasonable way and that is reasonable in all the circumstances.

These rules apply to a psychological injury the employer is first notified of on or after 1 July 2026. For an injury the employer was first notified of before that date, the Act continues to apply as if the 2025 amending Act had not commenced. The amendments also do not apply to police officers, paramedics or firefighters, to coal miners, or to volunteer claims under the Workers Compensation (Bush Fire, Emergency and Rescue Services) Act 1987.

What should workers with active psychological injury claims do now?

If you are yet to lodge a claim and believe you have a psychological injury caused by work, seek legal advice on your specific situation.

Finding a SIRA-approved psychologist

Regardless of the 2026 reforms, workers who receive approval for psychological treatment under their workers compensation claim can access sessions at no out-of-pocket cost. Finding a SIRA-approved psychologist who offers telehealth and is currently accepting workers compensation clients is often the first practical step.

Browse our directory of NSW psychologists (SIRA-provider status noted) -- all listed practitioners work with workers compensation claims and offer telehealth sessions. Use the filters to find practitioners by location or specialty.

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