Australia’s $789bn Warning Sign for Employers

Australia’s $789bn Warning Sign for Employers

by | May 4, 2026 | Health & Wellbeing, Mental Health, Work Health & Safety

A recent News.com.au report has sounded a clear warning: Australia’s $789 billion income support system is under increasing strain, driven largely by a surge in mental health?related claims across workers’ compensation, disability, and welfare schemes.

While the headline focuses on government finances, employers should not mistake this as a public?sector problem. Psychological injury claims are now one of the fastest growing, longest lasting, and most expensive risks facing Australian workplaces, and businesses are increasingly bearing the cost through higher premiums, stricter eligibility thresholds, and regulatory scrutiny.

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NSW Workers Compensation Reform Legislation-Passed

NSW Workers Compensation Reform Legislation-Passed

by | Feb 6, 2026 | Consulting, Health & Wellbeing, Workers Compensation

NSW has entered a defining new era in workers' compensation with the passage of the Workers Compensation Reform and Modernisation legislation, ushering in the most significant changes to psychological injury claims in more than a decade. As psychological injuries continue to rise and place mounting pressure on the scheme, the government have acted to create clearer definitions, streamline assessments, and improve the pathway to recovery for affected workers.



Most notably, the reforms directly target the rapid rise in psychological injury claims, an area long criticised for complexity, lengthy disputes, inconsistent assessments, and escalating scheme costs. Only 50% of workers with psychological injuries were returning to work within a year, compared with 95% of those with physical injuries, underscoring the need for a more robust early intervention and return to work model.

Government data and parliamentary inquiries also highlighted that unclear definitions, multiple assessments, and protracted disputes were contributing to poor worker outcomes and spiralling scheme liabilities.

Key Threshold Changes

Under current legislation, the WPI threshold for all work injury damage claims sits at 15%. The 2026 Act lifts this
threshold for psychological injury claims through a phased schedule:

  • From 1 July 2026: WPI threshold increases to 25%

  • From 1 July 2027: WPI threshold increases to 26%

  • From 1 July 2029: WPI threshold increases to 28%

The same staged increases will apply to the minimum WPI threshold required for access.

Legislative Changes and Their Impact

1. Clearer and More Objective Definitions of Psychological Injury

The reforms introduce specific, objective criteria for psychological injuries arising from:

  • Bullying

  • Excessive work demands

  • Racial harassment

  • Sexual harassment

A claim will only succeed where employment is the main contributing factor, creating greater certainty and consistency across liability decisions.

2. Dispute Resolution Via the Industrial Relations Commission

This aims to streamline disputes and reduce the need for lengthy appeals.

3. Refined Definition of Reasonable Management Action

Section 11A has been updated to provide clearer guidance on what constitutes reasonable management action, addressing a long-standing source of contention in psychological injury claims.

4. New Medical Expense and Treatment Threshold

The standard for payment of medical and treatment expenses has shifted from “reasonably necessary” to “reasonable and necessary”, establishing a higher threshold and reducing subjective interpretation.

5. Streamlined Whole Person Impairment (WPI) Assessments

This reduces duplication, disputes, and assessment shopping.

6. Caps on Weekly and Medical Benefits for Psychological Injuries

Weekly payments for primary psychological injuries

  • 130 weeks, unless the worker is assessed at 21% WPI or higher

  • Medical expenses for psychological injuries are also time-limited under amendments to Section 59A.

7. Permanent Impairment Threshold Maintained at 15%

The threshold for permanent impairment from 15% to 31% WPI was not passed, following criticism from unions and mental health professionals. The threshold remains at 15%.

Reform Aims

The NSW Workers Compensation Reforms aim to deliver:

  • Greater clarity around what does and does not constitute a compensable psychological injury

  • More consistent medical and impairment assessments

  • Early dispute resolution

  • Clearer pathways to treatment and return to work support

The NSW legislation now places strong emphasis on early recovery, functional rehabilitation, and re-employment, with long-term care reserved for higher-impairment cases.

Need Help?

Given the recency of these NSW Workers Compensation Reforms, time will be required to understand real-world implications. Despite these reforms, our continued focus remains leveraging our expertise, relationships and partner network to help achieve return-to-work outcomes for our clients' injured workers to help minimise workers compensation premium impacts. For assistance, contact us to discuss.

Further information

Source: SIRA
Title: Workers compensation reforms pass parliament - SIRA

Read time: 5+ mins

Source: NSW Government
Title: Workers compensation reforms pass parliament | NSW Government

Read time: 5+mins

NSW Workers Compensation Reform Legislation-Passed

NSW Reforms to Protect Workers: A New Era of Workplace Safety and Fairness

by | Jun 30, 2025 | Breaking News, Bullying, Health & Wellbeing, Mental Health, Work Health & Safety

In a landmark move to strengthen workplace protections, the Minns Labor Government has passed sweeping reforms that will impact over four million workers across New South Wales. These changes, enacted through the Industrial Relations and Other Legislation Amendment (Workplace Protections) Act 2025, mark a significant shift toward safer, fairer, and more inclusive workplaces.

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Respect at Work

Respect at Work

by | Aug 19, 2024 | Bullying, Health & Wellbeing, Injury Prevention, Managing Psychosocial Hazards, Work Health & Safety

Respect in the workplace is a cornerstone of healthy and productive work environments. In Australia, fostering respect at work has become a significant focus, driven by legislative changes and a growing awareness of the importance of a respectful workplace culture. So what is the legislative framework? How do you create a respectful workplace? What are the benefits of a respectful workplace?

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Mental Health Claims Increasing

Mental Health Claims Increasing

by | Nov 28, 2022 | Claims, Health & Wellbeing, Mental Health, Work Health & Safety, Workers Compensation

The rise in mental health claims in workers' compensation highlights a growing challenge for employers, insurers, and regulators. With psychological injuries now representing a significant portion of workplace claims, the system faces mounting pressure to balance fair compensation with sustainability. For businesses, understanding this trend is essential to ensure compliance, manage costs, and support employee wellbeing.

Read more: Mental Health Claims Increasing

The Growing Trend

Recent data shows a steady increase in claims related to stress, anxiety, depression, and other psychological conditions. Key drivers include:

  • Workplace pressures such as high workloads, tight deadlines, and organisational change.
  • Post-pandemic impacts, with employees reporting heightened stress and burnout.
  • Greater awareness and reduced stigma, encouraging more workers to lodge claims.

Implications for Employers

  • Rising claims can lead to higher premiums and increased scrutiny from regulators.
  • Employers must strengthen mental health policies, including proactive support and early intervention strategies.
  • A focus on workplace culture and resilience programs can reduce risk and demonstrate compliance.

Impact on Employees

  • Workers benefit from structured recovery support, including counseling and rehabilitation services.
  • However, stricter thresholds mean claims must be well-documented with clear medical evidence.
  • Early reporting and engagement with return?to?work programs improve outcomes.

Insurer and Legal Perspectives

  • Insurers face growing costs but gain predictability through reforms emphasizing rehabilitation.
  • Legal practitioners must adapt strategies to new entitlement rules and dispute resolution frameworks, particularly for psychological injury claims.

Conclusion

The increase in mental health claims underscores the importance of a proactive, compliant approach to workplace wellbeing. Employers, employees, insurers, and legal professionals must work together to ensure that compensation systems remain fair, sustainable, and focused on recovery.

Source: Seda

Title: Workplace face escalating mental health claims without action

Read time: 2mins

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