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The Short Answer
From 1 July 2026, the test that decides whether medical, hospital and related treatment is payable under a NSW workers compensation claim changes from "reasonably necessary" to "reasonable and necessary". The shift looks like a single dropped word. In practice it is the most significant change to the section 60 entitlement framework in more than a decade, and it aligns the workers compensation scheme with the language already used in NSW CTP and the NDIS.
For insurers, injury managers and treating providers, the change is not cosmetic. It introduces a higher evidentiary threshold, narrows the scope of what is payable, and explicitly invites regulator-issued guidelines to define the criteria. Claims that would have been approved under the old test will not all survive the new one.
The Current Test: "Reasonably Necessary"
Until 30 June 2026, section 60 of the Workers Compensation Act 1987 (NSW) entitles an injured worker to compensation for medical and related treatment that is reasonably necessary as a result of the workplace injury. The phrase has been judicially interpreted for decades, most influentially in Rose v Health Commission (NSW) and reaffirmed in Diab v NRMA Ltd [2014] NSWWCCPD 72.
Under that line of authority, an insurer or the Personal Injury Commission asks four practical questions when deciding whether treatment is reasonably necessary:
- Appropriateness of the proposed treatment to the injury and its consequences.
- Availability of alternatives, including more conservative options.
- Potential effectiveness of the proposed treatment, judged against the alternatives.
- Acceptance by medical experts that the treatment is appropriate and likely to be effective.
Critically, "reasonably necessary" does not mean "the only option" or "essential". It has been read as a relatively permissive standard: treatment can be reasonably necessary even if alternatives exist, provided the chosen option is defensible on the four factors above.
Under the current framework, the burden has effectively rested on the insurer to show that the treatment is not reasonably necessary, with the four-factor test interpreted broadly. Treatments such as long-term opioid maintenance, medicinal cannabis, and extended allied health programs have all been approved under "reasonably necessary" where alternatives were either tried or considered unsuitable.
The New Test: "Reasonable and Necessary"
The Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026 passed the NSW Parliament on 4 February 2026. Some administrative and premium-related provisions commenced on 27 March 2026. The substantive entitlement changes, including the new test for treatment payable under section 60, commence on 1 July 2026 by proclamation.
The new test reads "reasonable and necessary" rather than "reasonably necessary". The grammatical change matters. "Reasonably" functions as an adverb softening "necessary"; treatment can be loosely necessary if it is reasonable. The new wording sets two distinct, conjunctive limbs: the treatment must be reasonable, and it must be necessary. Both must be made out, not just one or the other.
The detail of how the new test will operate is being delegated to regulations and SIRA-issued guidelines, which are expected to draw on the NDIS section 34 framework. Under that framework, six criteria are typically considered:
- The support will assist the person to pursue stated goals (in workers comp terms: return to work and functional recovery).
- It addresses the functional impact of the injury, not unrelated or secondary conditions.
- It represents value for money, judged against alternatives or long-term benefit.
- There is evidence or professional recommendation that it is likely to be effective.
- It is not something that should reasonably be provided by family, the community, or other systems.
- It is appropriately funded by the scheme, not by Medicare, the PBS, or another payer.
Under "reasonably necessary", treatment that is defensible tends to be approved. Under "reasonable and necessary", treatment must be both defensible and required. Open-ended scripts, indefinite physiotherapy, polypharmacy without review, and parallel allied health programs are the most exposed categories under the new wording.
How CTP and NDIS Already Apply This Test
NSW workers comp is not inventing a new standard. It is moving onto a test already used in two adjacent injury schemes.
Under the Motor Accident Injuries Act 2017 (NSW), section 3.24 makes treatment and care payable only where it is reasonable and necessary in the circumstances and relates to the motor accident injury. CTP Care, the lifetime care arm for long-term CTP claimants, applies this test on every funding decision. SIRA also has explicit power under the Motor Accident Guidelines to stipulate what counts as reasonable and necessary for particular injury types.
Under the National Disability Insurance Scheme Act 2013 (Cth), section 34 sets the "reasonable and necessary supports" test for every line item in a participant plan. The NDIA must be satisfied on all six criteria before a support is funded.
For insurers and injury managers who already work across schemes, the implication is significant. The evidentiary discipline that has long been required for CTP and NDIS funding decisions now applies inside the workers comp file as well. Treating providers writing requests for funding will need to frame submissions in the same structured way.
| Scheme | Test | Statutory basis | Effective from |
|---|---|---|---|
| NSW workers compensation (current) | Reasonably necessary | s60, Workers Compensation Act 1987 | Until 30 June 2026 |
| NSW workers compensation (new) | Reasonable and necessary | s60 as amended by the Reform and Modernisation Act 2026 | From 1 July 2026 |
| NSW CTP | Reasonable and necessary | s3.24, Motor Accident Injuries Act 2017 | Since 1 December 2017 |
| NDIS | Reasonable and necessary | s34, NDIS Act 2013 (Cth) | Since 2013 |
| Victoria WorkCover | Reasonable cost of services | Workplace Injury Rehabilitation and Compensation Act 2013 | Unchanged |
| Queensland workers comp | Reasonable in all the circumstances | Workers' Compensation and Rehabilitation Act 2003 | Unchanged |
What This Means for Insurers and Injury Managers
The change affects three layers of the claim file.
At intake and approval, the standard of evidence required to approve treatment rises. A short referral letter naming a treatment is unlikely to satisfy both limbs of the new test on its own. Insurers should expect to see, and to ask for, evidence that addresses each of the six NDIS-style criteria, particularly value for money against alternatives and the link between the treatment and a defined recovery or return-to-work goal.
At ongoing review, open-ended approvals become harder to justify. Treatment that was reasonable and necessary at week six of a claim may not remain so at week sixty, and the new test creates a stronger basis for time-limited approvals and scheduled reviews. The reforms also tie ongoing entitlement to weekly benefits status: reasonable and necessary medical treatment can be covered for one year after weekly benefits end, unless the worker meets the Whole Person Impairment threshold for extended benefits.
At dispute, the existing body of Diab-era case law remains useful as background but will not directly determine the new test. Early Personal Injury Commission decisions on the new wording will be closely watched, and submissions will need to engage with the statutory criteria rather than the four-factor common-law framework.
Treatments most likely to require restructured evidence under the new test include: long-term opioid and benzodiazepine prescribing, medicinal cannabis, gabapentinoids without specialist endorsement, parallel physiotherapy and chiropractic programs, and psychological treatment continuing without measurable outcome change. These are also the categories where IMM pharmacy reviews most often flag risk under the current test.
What Good Claim Documentation Looks Like Under the New Test
Step 1: Link to the compensable injury
Explicit statement that the treatment relates to the accepted injury, not to a pre-existing condition or a secondary issue outside the claim. Vague indications such as "pain management" are higher risk under the new wording.
Step 2: Functional goal
The treatment should be tied to a defined functional or return-to-work goal, ideally one that mirrors language in the certificate of capacity or rehabilitation plan. Treatment without a measurable goal struggles on the "necessary" limb.
Step 3: Alternatives considered
The submission should show what less intensive, less costly, or evidence-stronger alternatives were considered and why they are not suitable. Silence on alternatives is the single most common reason CTP and NDIS funding requests are refused.
Step 4: Duration cap and review point
Open-ended requests are harder to defend. A clear duration, a review date, and the metric that will be used at review (pain score, function score, RTW status) all strengthen the request.
Step 5: Exit and de-escalation plan
For higher-risk treatments, particularly long-term medications, an explicit tapering or step-down plan signals that the prescriber is managing the treatment, not simply renewing it.
When to Refer for Independent Review
The transition window between now and 1 July 2026 is the right time to audit existing high-exposure files. Files that have run for more than 12 months, files with three or more concurrent medications acting on the central nervous system, and files where treatment volume is rising without corresponding functional gain are all candidates for an independent pharmacy review before the new test commences.
Independent Med Management's clinical pharmacist reviews are structured around the same five-step documentation framework above, with implementation rates above 80 per cent when recommendations are returned to the prescriber. The same review format works under both the current and new tests, which means a review commissioned now produces documentation that holds its value across the 1 July transition.
For NSW workers compensation matters, the practical advice is straightforward. Audit the file against the new test before the test arrives. Tighten documentation on the highest-exposure treatments first. And expect that the standard required to keep treatment funded will look more like the CTP and NDIS process than like the workers compensation file you closed last year.
