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Psychological Injury Compensation in NSW: What You Are Entitled To

If you have been injured at work and are dealing with a psychological injury, understanding what you are financially entitled to can feel overwhelming. This guide explains the main types of compensation available under the NSW workers compensation scheme, what affects the amounts, and how psychological treatment funding fits alongside (and separate from) lump-sum entitlements.

The Two Main Types of Psychological Injury Compensation in NSW

NSW workers compensation provides two distinct types of financial support for psychological injuries:

1. Ongoing support while you cannot work — weekly payments (income replacement) and fully-funded medical treatment including psychology sessions.
2. Permanent impairment compensation — a lump-sum payment if your injury causes lasting impairment assessed above the threshold.

These are separate pathways and can both apply to the same injury. Most workers access the first (weekly payments + treatment) early in the process; the second (permanent impairment) comes later, after treatment has stabilised.

1. Weekly Payments: Income Replacement

If your psychological injury means you cannot work or can only work in a reduced capacity, you are entitled to weekly payments under the Workers Compensation Act 1987 (NSW). The amounts are:

Weekly payment rates are indexed periodically. Check current rates with icare or SIRA directly, as specific dollar amounts change with indexation adjustments. Source: SIRA NSW Workers Insurance (accessed June 2026).

2. Medical Treatment Funding (Psychology Sessions)

Separately from weekly payments, approved psychological treatment under NSW workers compensation is funded directly by your insurer at SIRA gazetted rates. This means:

• You pay no out-of-pocket gap fee for approved sessions.
• Your psychologist bills the insurer directly using SIRA billing codes (PSY001/PSY002 for in-person; PSY301/PSY302 for telehealth).
• The number of sessions is not capped at a fixed limit (unlike Medicare's 10-session rule under Better Access). Funding continues as long as clinical need is demonstrated in your psychologist's treatment requests (AHTRs).
• SIRA gazetted rates from 1 February 2026: PSY301 (initial telehealth session, 60 min) approximately $271.60; PSY302 (subsequent telehealth, 60 min) approximately $226.80. Source: SIRA NSW gazetted rates 2026.

Treatment funding is about getting well. Permanent impairment compensation (below) is assessed after treatment has concluded and your condition has stabilised. These two things happen at different times in your claim.

3. Permanent Impairment Compensation: The Lump-Sum Pathway

If your psychological injury causes lasting impairment that does not resolve with treatment, you may be eligible for a lump-sum permanent impairment payment. This is assessed separately from weekly payments and treatment.

Whole Person Impairment (WPI) and the 11% threshold

Permanent impairment is expressed as a percentage of "whole person impairment" (WPI). For psychological injuries from incidents on or after 19 June 2012, the threshold for a lump-sum payout is 11% WPI. Workers assessed below this threshold do not receive a lump-sum permanent impairment payment.

A WPI assessment is carried out by an Approved Medical Specialist (AMS) appointed through the Personal Injury Commission (PIC). The AMS applies:

• Chapter 14 of the AMA Guides to the Evaluation of Permanent Impairment (Fifth Edition)
• As modified by the NSW Workers Compensation Guidelines for the Evaluation of Permanent Impairment (6th edition, 2021)

Source: SIRA Permanent Impairment Guidelines (accessed June 2026).

How lump-sum amounts are calculated

The lump-sum amount depends on your assessed WPI percentage. Under the Workers Compensation Act 1987 (NSW) Schedule 3, maximum compensation amounts are set in legislation and adjusted periodically. For context, a 15% WPI psychological injury assessment could yield a lump sum in the range of $80,000–$150,000 depending on the current legislative maximum and age adjustments; a 30%+ assessment could be considerably higher. However, these are illustrative ranges only — your specific entitlement requires legal advice and a formal AMS assessment.

A workers compensation lawyer can provide a realistic estimate based on current legislative amounts and your specific circumstances. Many offer free initial consultations. The Law Society of NSW can provide referrals: lawsociety.com.au.

Section 11A: The Employer Defence

Section 11A of the Workers Compensation Act 1987 (NSW) provides a complete defence for employers where a psychological injury arises solely from "reasonable action" taken by the employer in relation to:

• Transfer, demotion, promotion, or performance management
• Provision of employment benefits
• Disciplinary action
• Retrenchment or dismissal

This defence is commonly raised in psychological injury claims where the employee is experiencing stress related to management decisions. It does NOT apply if:

• The action was not reasonable (e.g. the performance management was procedurally unfair or involved bullying)
• The injury was contributed to by other factors beyond the management action

If your claim has been declined under section 11A, the SIRA Merit Review and Personal Injury Commission (PIC) are available review pathways. A workers compensation lawyer can advise on the strength of the defence in your circumstances. See also: Disputed claim guide.

When Can You Request a Permanent Impairment Assessment?

A permanent impairment assessment can only be requested once you have reached maximum medical improvement (MMI) — the point at which your condition has stabilised and is unlikely to change significantly with further treatment. Your treating psychologist will indicate when MMI is reached. This typically means:

• You have completed an active course of psychological treatment.
• Your symptoms and functional limitations have stabilised.
• Further treatment is unlikely to result in significant improvement.

Requesting a permanent impairment assessment too early (before MMI) can result in an underestimation of your WPI. A workers compensation lawyer can advise on timing.

Psychological Treatment and Your Lump Sum: Do They Affect Each Other?

No. Receiving and funding psychological treatment under workers compensation does not reduce your entitlement to a permanent impairment assessment or lump-sum payment. In fact, engaging with appropriate treatment is part of your obligation to mitigate the effects of your injury. The treatment and compensation pathways run in parallel.

The permanent impairment assessment happens after active treatment concludes — so attending psychology sessions now does not affect your later entitlement.

Finding a SIRA-Approved Psychologist for Your Claim

Before permanent impairment becomes relevant, the first step is accessing treatment. To get your psychological treatment funded by workers compensation, your treating psychologist must be SIRA-approved.

Summary: Key Entitlements at a Glance

Frequently Asked Questions

Next Steps

• If your claim has not started yet: Psychological injury workers comp guide
• If your claim has been disputed: Disputed claim guide
• To find a SIRA-approved psychologist for funded treatment: Directory
• For legal advice on compensation amounts: Law Society of NSW referral service
• For scheme information: SIRA NSW