The New South Wales government is moving forward with a renewed legislative agenda aimed at overhauling the state’s workers' compensation system. The latest steps come after previous reform efforts faced resistance in parliament, prompting the government to revise its approach and outline further actions for employers, insurers, and policyholders.
Central to the government’s plan is the passage of the Workers' Compensation Legislation Amendment Bill 2025, alongside amendments to the Reform and Modernisation Bill to incorporate proposals from independent crossbenchers. The government has also commissioned the chief psychiatrist to develop improved psychiatric assessment protocols for workers compensation claims, reflecting a growing recognition of the complexities associated with psychological injuries.
Additionally, icare, the state’s insurance and care provider, has been instructed to notify policyholders about imminent premium increases and to remind them of existing hardship provisions. These measures are intended to prepare employers for upcoming changes and to ensure that support mechanisms are clearly communicated.
This directive aligns with icare’s announcement in early 2025 that the average workers compensation premium rate in NSW will rise by 8% for the 2025-26 financial year. The adjustment follows a statutory order from Workplace Health and Safety Minister Sophie Cotsis, which set an annual cap of 8% on average premium increases for three consecutive years, covering the 2023-24 to 2025-26 period.
The reform process has been shaped by political debate, with opposition from the Liberal and National parties, as well as other crossbench members, cited by the government as a factor in the ongoing challenges facing the scheme. The government has argued that this opposition has contributed to financial pressures, resulting in higher premiums for businesses and not-for-profit organisations.
Treasurer Daniel Mookhey commented: “The government will shift its attention now to getting the community ready to deal with some very steep rises in premiums, following the Liberal Party’s decision to block reform. Businesses and charities will be slugged with the worst premiums in the country. This situation could have been avoided if the Liberal Party had spent more time working towards a solution and less time playing politics on an issue.”
The push for workers' compensation reform in NSW has also been shaped by regulatory efforts to improve claims management. In September 2025, the State Insurance Regulatory Authority (SIRA) completed a review of claims management practices in NSW, prompted by recommendations from the 2023 Law & Justice Review. The review highlighted the need for a more person-focused approach to claims, particularly in the context of psychological injury.
SIRA’s recommendations include:
SIRA chief executive Mandy Young said: “By shifting to a more empathetic, people-first claims model, which operates within the legislative parameters of the workers' compensation system, we can better support recovery and return to work for people injured at work.”
Insurance brokers have responded to the evolving reform landscape by emphasising the importance of compliance, education, and training to address psychological injury and manage costs. Gary McMullen, director of workplace risk at Aon, said: “The NSW workers’ compensation scheme stands at a critical crossroads and requires careful consideration to ensure its long-term sustainability.”
McMullen further noted that focusing on preventative strategies could address underlying issues and encourage broader support from stakeholders, ultimately benefiting both employers and employees. “These measures would address the root causes and create a sustainable solution that benefits both employers and employees,” he said.
