NSW Workers Compensation Reform 2026: What Psychological Injury Claimants Need to Know
In short: The Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2025 (NSW), assented 11 February 2026, introduces a 130-week cap on weekly income replacement payments for most primary psychological injury claims (from 1 July 2026). The Whole Person Impairment (WPI) threshold for weekly payments continuing beyond 130 weeks and for work injury damages / common law access rises from 15% to 25% (also from 1 July 2026) -- the lump-sum permanent impairment threshold is separate and unchanged at 15% WPI. Psychology treatment funding through SIRA-approved sessions is not removed by these changes -- treatment remains funded during the claim period. Claims lodged before 1 July 2026 may be protected by transitional rules. Seek legal advice if your claim is active.
NSW workers compensation changed significantly in early 2026. The Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2025 was assented to on 11 February 2026, with key provisions affecting psychological injury claims taking effect from 1 July 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
From 1 July 2026, weekly income replacement payments for most primary psychological injury claims are capped at 130 weeks (approximately 2.5 years). This is a reduction from the previous framework, which allowed weekly payments for up to 260 weeks.
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. New Whole Person Impairment (WPI) threshold for weekly-payment continuation and common law access
The Whole Person Impairment (WPI) threshold for weekly payments continuing beyond 130 weeks, and for work injury damages / common law access, rises from 15% to 25% from 1 July 2026. This threshold will increase further over coming years. This does not affect the lump-sum permanent impairment threshold, which stays at 15% WPI -- see the note below the table.
| From date | WPI threshold: weekly-payment continuation / common law |
|---|---|
| Before 1 July 2026 | 15% WPI |
| From 1 July 2026 | 25% WPI |
| From 1 July 2027 | 27% WPI |
| By 2029 | At least 28% WPI |
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
Workers who exceed the WPI threshold can access extended weekly payments beyond 130 weeks:
- 21% to 24% WPI: eligible for an additional year (52 weeks) of weekly payments at 60% of pre-injury average weekly earnings (PIAWE) or the maximum weekly compensation amount, whichever is lower.
- 25% WPI or more (rising to 28% by 2029): eligible for continued weekly payments beyond 130 weeks and for work injury damages / common law claims, depending on assessment. (The lump-sum permanent impairment threshold is separate and stays at 15% WPI regardless of this figure.)
- Above 30% WPI: lifetime medical access (including psychology treatment) is retained.
What is NOT changing
Psychology treatment during your claim
The reform does not remove access to SIRA-funded psychology sessions while your claim is active. Workers with an approved psychological injury claim and a SIRA-approved psychologist can continue receiving funded sessions (at no out-of-pocket cost) for the duration of their weekly payment period. The SIRA gazetted rate for psychology sessions -- 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) from 1 February 2026 -- is unchanged by this reform.
Treatment access after weekly payments cease
Workers whose weekly payments end (whether at 130 weeks or after extended payments) retain access to one year of reasonable and necessary medical treatment after weekly payments stop, including psychology. Workers assessed at 30% WPI or above retain lifetime medical access.
The claims process and treatment pathway
How you access SIRA-approved psychological treatment is unchanged. The pathway remains: 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 tightens the eligibility for claims arising from employer conduct. A psychological injury caused by "relevant conduct" -- such as bullying, harassment, or unreasonable workplace demands -- remains compensable, but the claimant must now satisfy an objective "reasonable person" test. Claims based on interpersonal conflict or general work stress alone face a higher bar under the new framework.
The exclusion under section 11A of the Workers Compensation Act 1987 (NSW) -- which excludes injuries arising "wholly or predominantly from reasonable action taken or proposed to be taken by the employer" in relation to performance management, discipline, or restructuring -- remains in place and was not substantively changed by the 2026 reform.
What should workers with active psychological injury claims do now?
If you have an active claim:
- Continue your treatment sessions -- psychology funding is unchanged during your claim period.
- Seek legal advice if you are approaching a WPI assessment or if your claim is nearing the 130-week mark.
- Contact the SIRA workers compensation line (1300 656 919) for general guidance on your specific entitlements.
- Contact icare (13 44 22) if you have questions about how your insurer is applying the transition rules to your claim.
If you are yet to lodge a claim and believe you have a psychological injury caused by work, lodging your claim as soon as possible may give you access to the transitional provisions available to claims lodged before 1 July 2026. 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 SIRA-approved psychologists in NSW -- all listed practitioners work with workers compensation claims and offer telehealth sessions. Use the filters to find practitioners by location or specialty.
FAQs
Does the 2026 reform affect psychology treatment funding?
The reform primarily affects weekly income replacement payments and lump-sum entitlements, not treatment access. Workers with approved claims continue to receive SIRA-funded psychology sessions during the period they receive weekly payments. After weekly payments cease, most workers retain one year of medical treatment access. Workers above 30% WPI retain lifetime medical access. The 130-week cap does not remove treatment entitlements during that period.
What is the 130-week cap?
From 1 July 2026, weekly income replacement payments for most primary psychological injury claims are capped at 130 weeks (approximately 2.5 years). Workers with a WPI of 21% or more may be eligible for extended payments beyond 130 weeks. This cap does not apply to secondary psychological injuries.
What is the new WPI threshold from 1 July 2026?
The WPI threshold for weekly-payment continuation beyond 130 weeks and for work injury damages / common law access rises from 15% to 25% from 1 July 2026, rising to 27% from July 2027 and at least 28% by 2029. This does not change the lump-sum permanent impairment threshold, which stays at 15% WPI. Claims lodged before 1 July 2026 may benefit from transitional provisions. Legal advice is essential if your claim may be affected.
Are claims lodged before 1 July 2026 affected?
Claims lodged before 1 July 2026 may benefit from transitional provisions allowing assessment under pre-reform thresholds in some circumstances. The transitional rules are complex. Workers with active claims should seek specific legal advice as soon as possible to understand whether their entitlements are protected under the transition rules.
Does the reform change access to SIRA-approved psychology sessions?
No. The reform does not change how SIRA-approved psychology sessions are accessed or paid. The SIRA gazetted rate (approximately $284.40 initial / $237.60 subsequent, from 1 February 2026) and the no-gap-fee model for workers are unchanged. The reform affects income entitlements and lump-sum access, not the treatment pathway.
Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2025 (NSW), assented 11 February 2026. Workers Compensation Act 1987 (NSW), s.11A (reasonable management action exclusion). SIRA NSW, Workers Compensation Reform FAQs, sira.nsw.gov.au. icare NSW, Workers Compensation Reform FAQs, icare.nsw.gov.au.
Not legal advice. This guide is a plain-English summary for information purposes only. Individual circumstances vary. Seek advice from a workers compensation lawyer for advice on your specific claim. For lawyer referrals: NSW Law Society Referral Service 1300 657 574.
Find a SIRA-approved psychologist for your workers comp claim
All listed practitioners work with workers compensation claims and offer telehealth.
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