Workers Compensation
From 1 July 2026, NSW changed how a primary psychological injury is compensated. A claim now only succeeds if a relevant event caused the injury, and the pathway differs for bullying, harassment and work demands.
What the primary psychological injury rules changed
The new rules apply to a primary psychological injury first notified to the employer on or after 1 July 2026. A psychological injury is defined as a mental or psychiatric disorder that causes behavioural, cognitive or psychological dysfunction. Compensation is only payable where a relevant event caused the injury, there is a real and direct connection between that event and the worker's employment, and employment is the main contributing factor.
The rules do not apply to exempt workers such as police, paramedics and firefighters, or to coal miners, volunteers, dust disease claims, claims notified before 1 July 2026, or secondary psychological injuries that follow a physical injury.
What is a relevant event?
A relevant event is a workplace event specified in the law. The list includes:
- violence or a threat of violence, or indictable criminal conduct
- witnessing a traumatic incident, or a dead or seriously injured person at the scene
- the death of a person in the worker's care
- vicarious trauma from repeated exposure to others' traumatic experiences
- bullying, sexual harassment, racial harassment, or excessive work demands
If the injury was not caused by a relevant event, the worker will not be entitled to compensation.
Why the claims pathway splits
The type of relevant event decides how the claim is managed. Injuries caused by violence, criminal conduct, witnessing a traumatic incident, vicarious trauma or the death of a person in care follow the standard pathway, with provisional weekly payments starting within 7 days unless there is a reasonable excuse.
Injuries caused by bullying, sexual harassment, racial harassment or excessive work demands are relevant conduct claims. These require a completed claim form and follow a separate pathway.
Interim entitlements and impairment thresholds
Interim entitlement payments are 75 per cent of pre-injury average weekly earnings for a worker with no capacity, or 75 per cent of PIAWE less current earnings where there is reduced capacity, capped at the statutory maximum. If a relevant conduct claim is accepted, weekly payments move up to the higher rate of up to 95 per cent of PIAWE, with back pay for the difference.
For primary psychological injuries, the duration of weekly payments and treatment now depends on whole person impairment. Entitlements step up across bands from 0 to 20 per cent through to 31 per cent or more, and the work injury damages threshold rises to at least 25 per cent from 1 July 2026.
Reasonable management action
A primary psychological injury is not compensable where the predominant significant cause was reasonable management action taken in a reasonable way. Performance reviews, transfers, investigations of misconduct, disciplinary action and redundancy can all be reasonable management action, provided they are reasonable in all the circumstances.
Key Takeaways
- The reforms apply to a primary psychological injury first notified on or after 1 July 2026.
- A claim is only compensable if a defined relevant event caused the injury and employment is the main contributing factor.
- Bullying, harassment and excessive work demands are relevant conduct claims on a separate 42 day pathway.
- Interim entitlement payments and up to $7,500 in treatment apply while a relevant conduct claim is decided.
- Reasonable management action taken in a reasonable way is not compensable.
Frequently Asked Questions
When do the new psychological injury rules apply?
The new rules apply to primary psychological injuries first notified to the employer on or after 1 July 2026. They do not apply to exempt workers such as police, paramedics and firefighters, to coal miners, volunteers, dust disease claims, or to secondary psychological injuries.
What is a relevant event?
A relevant event is a workplace event specified in the law, such as violence, indictable criminal conduct, witnessing a traumatic incident, vicarious trauma, the death of a person in the worker's care, bullying, sexual or racial harassment, or excessive work demands. A primary psychological injury is only compensable if a relevant event caused it.
What is a relevant conduct claim?
A relevant conduct claim is a primary psychological injury caused by bullying, sexual harassment, racial harassment or excessive work demands. It follows a separate pathway where the insurer has 42 days to decide liability, with interim entitlement payments and up to $7,500 for treatment in the meantime.
Primary source: State Insurance Regulatory Authority (SIRA), Psychological injuries: a guide for workers and employers, 2026.
