NSW Labor and Coalition Agree on Changes to Workers' Compensation for Psychological Injuries
NSW Labor and the Coalition have reached a deal to reform workers’ compensation for psychological injuries, with new legislation expected in 2026 and an 18-month premium freeze for the insurance scheme.
Under the agreement, the permanent impairment threshold for compensation will rise from 15% to 25%. Workers assessed at 25% impairment or less will receive two years of income support plus one transition year but will not have ongoing support.
Labor had initially proposed raising the threshold to 31%, but unions and experts warned this would exclude most mental health claims; the compromise set the threshold at 25%.
The deal includes freezing iCare premiums for 18 months and providing an additional 12 months of medical benefits and income support for workers participating in a return-to-work program. Participants in this program would receive 60% of their pre-injury wage, although details of the program's delivery remain to be finalized. Employers are not required to reintegrate workers or provide the reintegration program.
Liberal leader Kellie Sloane stated the deal offers certainty for businesses and sustainability for the scheme. NSW Treasurer Daniel Mookhey said it stabilizes the system.
However, Unions NSW acting secretary Thomas Costa criticized the changes, pointing out that the threshold could rise to 25% now and possibly 28% by 2029, effectively reducing entitlements for traumatised workers.
Critics argue that raising the impairment threshold and cutting support while a new diagnostic tool is being developed is counterproductive and undermines protections for workers suffering psychological injuries.
