NSW Workers' Compensation Reforms and Safety Fine | Workers Compensation Specialists Australia | Reduce Premiums

Employers across New South Wales are entering a new regulatory environment as significant workers’ compensation reforms take effect alongside continued enforcement activity by workplace safety regulators. Recent changes to treatment approval requirements and expanded commutation pathways are expected to reshape claim management, while a notable prosecution by SafeWork NSW v A.C.N 646 774 656 Pty Ltd reinforces the serious consequences of failing to adequately manage workplace risks.

NSW Introduces Tougher Treatment Approval Test

Effective 1 October 2026, New South Wales has replaced the previous "reasonably necessary" test for workers’ compensation medical expenses with a stricter "reasonable and necessary" standard. Under the new framework, treatment must:

Primarily treat the compensable injury
Be clinically justified
Treatment must provide good value for money

The reform applies to new medical expense claims lodged from 1 October 2026 and aims to strengthen oversight of treatment approvals while supporting scheme sustainability. Industry experts say the new "reasonable and necessary" test sets a higher threshold, requiring insurers to assess both the reasonableness and necessity of treatment before approving claims

Expanded Commutation Options for Injured Workers

At the same time, NSW has broadened access to commutation arrangements, allowing greater numbers of injured workers to resolve future compensation entitlements through lump sum settlements. The expanded framework creates new eligible categories covering workers receiving weekly payments and medical benefits, workers receiving medical benefits only, and certain hearing loss claims.

All commutation agreements now require approval from the Personal Injury Commission, and workers must obtain independent legal advice before entering an agreement. Financial advice is also mandatory for settlements exceeding $100,000.

For employers and insurers, these reforms may provide opportunities to reduce long-tail liabilities while offering workers greater flexibility in managing their future compensation arrangements.

Workplace Fatality Leads to $187,500 Fine

The importance of proactive risk management was highlighted in SafeWork NSW v A.C.N 646 774 656 Pty Ltd [2026] NSWIC 53, where the NSW Industrial Court convicted and fined the company $187,500 following a fatal workplace incident.

A tragic workplace incident occurred on 31 May 2023 at a demolition site in Kooragang during demolition works. An excavator lifting a conveyor struck a 12-metre light pole, causing it to fall and fatally injure a worker. At the time of the incident, the company operated as Drumderg Services Australia Pty Ltd.

The company pleaded guilty to breaching its duties under sections 19(1) and 32 of the Work Health and Safety Act 2011 (NSW) by failing to ensure, so far as was reasonably practicable, the health and safety of workers.

Key Findings from the Court

The Court found that although safety systems existed, they were not adequately implemented or enforced. Significant factors included:

Failure to remove a known hazardous light pole before demolition commenced
Inadequate enforcement of exclusion zones
Reliance on verbal instructions rather than physical barriers and other controls
Failure to effectively implement existing risk control measures

The Court emphasised that simply having documented safety procedures is insufficient if those measures are not actively applied and supervised on site. The judgment also confirmed that the responsibility of a person conducting a business or undertaking (PCBU) cannot be diminished by pointing to the failures of individual workers or supervisors.

Lessons for Employers

These developments collectively demonstrate NSW's continued focus on balancing workers’ compensation sustainability with rigorous workplace safety expectations. Employers should consider:

Reviewing injury management and treatment approval processes to align with the new "reasonable and necessary" requirements
Assessing opportunities and risks associated with expanded commutation arrangements
Ensuring safety management systems are actively implemented, monitored, and enforced
Regularly reviewing plant and demolition-related hazards, exclusion zones, and risk controls
Verifying that foreseeable hazards are eliminated wherever reasonably practicable before work begins

Insights

The October 2026 reforms and the decision in SafeWork NSW v A.C.N 646 774 656 Pty Ltd send a clear message to NSW employers: compliance now requires more than having policies on paper. Whether managing workers’ compensation claims or workplace safety risks, regulators and courts are increasingly focused on evidence of practical implementation, proactive decision-making, and demonstrable risk management. Organisations that fail to translate procedures into action may face significant financial, operational, and legal consequences.

Navigating workplace relations, workers' compensation reforms, and WHS compliance obligations can be complex. The recent NSW workers' compensation changes and evolving regulatory expectations highlight the importance of proactive risk management and compliance strategies.

If you would like advice on workers' compensation, workplace health and safety obligations, claims management, return to work programs, or workplace compliance, contact our ABILITY GROUP team.