NSW workers compensation reforms: what’s changing next and how businesses can prepare

Major reforms to the NSW workers compensation scheme continue to progress, with two separate pieces of legislation passed by Parliament in late 2025 and early 2026.

While details are still being finalised and commencement dates are to be confirmed, understanding the direction of the reform can help businesses prepare for what’s ahead.

Here’s a breakdown of what’s changing and what it could mean for your business.

What’s changing?

New reform bills

Two reform bills have been passed:

• The Workers Compensation Legislation Amendment Bill 2025, passed on 18 November 2025
• The Workers Compensation Legislation Amendment (Reform and Modernisation) Bill, passed on the 4 February 2026 (currently awaits assent).

Together, these reforms introduce new eligibility rules, decision timeframes, and dispute pathways.

Stricter eligibility for psychological injury claims

Under the reforms, psychological injury claims will need to relate to a clearly defined event, being either a:

• Conduct event – for example, bullying or unreasonable work demands; or,
• Traumatic event – for example, violence or serious workplace accidents.

New dispute pathways

There will also be changes to how disputed claims are reviewed.

• Disputed conduct-based claims will have the conduct determined by the Industrial Relations Commission after an internal review has been undertaken
• If conduct is determined, the insurer has seven days to accept the claim or continue to dispute
• Ongoing disputes will then be determined by the Personal Injury Commission (PIC).

New insurer decision timeframes

Updated decision timeframes are being introduced for conduct based claims.

• Insurers will have 42 days to determine liability for conduct-based claims
• If a decision is not made, it may result in deemed acceptance
• Once liability is accepted or deemed, back-payment of weekly benefits and medical expenses will be required within 21 days.

Changes to worker entitlements

Several entitlement thresholds will also change over time.

Key updates include:

• The whole person impairment (WPI) threshold for weekly payments beyond 130 weeks will increase to 25% from 1 July 2026, and 28% from 1 July 2029
• Workers with a WPI above 21% will be eligible for an additional 52 weeks of benefits from 1 July 2026, increasing to 27% WPI from 1 July 2027
• Work Injury Damages (WID) thresholds will gradually increase for injuries occurring from 1 July 2026
• Liability test for medical and related expenses will change from “reasonably necessary” to “reasonable and necessary.”

Expanded reasonable management action defence

The reforms include updates to the reasonable management action defence. Compensation won’t be payable where reasonable management action, taken reasonably, is the significant cause of the injury. This provides greater clarity for businesses when it comes to:

• Performance management
• Organisational change decisions.

Assessment and procedural reforms

Other changes include:

• A move to a single WPI assessment
• A review of the Psychiatric Impairment Rating Scale
• Broader access to commutation
• Annual indexation of entitlements
• Premium rate freeze from 30 June 2026 to 30 June 2028.

When and how will changes apply?

Timings may vary depending on the reform details and commencement dates, with some reforms dependent on final regulations and practice directions.

• Some changes will apply to new claims only
• Others will extend to existing claims.

Supporting businesses through change

Legislative change can be complex – and keeping up to date takes time.

At QBE, we’re at the heart of helping businesses understand what’s changing and what it means in practice for claims management, return-to-work planning, and workplace practices.

We’ll continue to share updates as more details are released, to help you prepare as the regulatory landscape continues to evolve. If you have questions about how these changes affect your business or your clients, reach out to your QBE representative today.

Learn about QBE Workers Compensation insurance.