The NSW Government has introduced the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025, representing the most significant shake-up to the State’s workers compensation framework in years. This is despite the original amendment bill containing the same amendments being before a parliamentary inquiry. This version of the Bill also contains WHS legislation amendments that deal with the use of Artificial Intelligence.
The reforms aim to modernise the scheme, tighten eligibility rules, improve dispute resolution, and strengthen employer obligations, especially around psychological injury claims, injury assessments, and return-to-work processes.
Key Changes in the Bill
1. Higher Thresholds for Permanent Impairment and Damages
- Physical injuries – minimum impairment threshold for common law damages remains at 15%.
- Psychological injuries – threshold rises from 25% to 31% for weekly payments beyond 130 weeks, lump sum claims, and common law damages.
- Weekly payments for primary psychological injuries capped at 130 weeks unless impairment is at least 31%.
2. Tightened Rules for Psychological Injury Claims
- No compensation for a primary psychological injury unless it results from a defined “relevant event” (e.g. violence, sexual or racial harassment, bullying, excessive work demands).
- Injury must have a real and direct connection to employment, and work must be the main contributing factor.
- New fast-track process for bullying/harassment/excessive work demand claims — insurers must accept or reject within 42 days.
3. New Single Assessment Process
- Only one official permanent impairment assessment allowed unless there’s an unexpected and material deterioration of 10% or more.
- Mandatory independent legal advice before assessment.
- State Insurance Regulatory Authority (SIRA) will keep a public register of approved assessors.
4. Indexation and Benefit Increases
- Lump sum death benefits increase from $750,000 to $955,950.
- Maximum weekly compensation rises to $2,569.60.
- All benefits to be indexed annually from 1 April each year.
5. Death Benefit Disputes
- New process allowing settlement of disputed lump sum death benefits with Personal Injury Commission oversight.
6. Commutations
- Regulations may expand access to lump sum commutations for certain claims, with PIC approval required.
7. WHS Link – Digital Work Systems
- Amends the Work Health and Safety Act 2011: PCBUs using digital work allocation systems must ensure, so far as reasonably practicable, that the system does not create health and safety risks.
CCF NSW will continue to update members as this progresses through parliament. For more information contact CCF NSW on 9009 4000.