NSW Workers Compensation Changes 1 July 2026: What They Mean for Injured Workers

The NSW workers’ compensation system changed significantly on 1 July 2026.

The reforms represent some of the most substantial changes to injured workers’ rights in recent years and will affect thousands of people across New South Wales who sustain workplace injuries.

At Garling&Co, we have been closely reviewing the changes. While the stated objective is to improve the sustainability of the workers’ compensation system, many of the reforms make it more difficult for injured workers to access benefits, challenge insurer decisions and obtain legal assistance.

Understanding these changes is now more important than ever.

For many years, injured workers have relied on funding through the Independent Legal Assistance and Review Service (ILARS) to obtain advice and representation when disputes arose with insurers.

From 1 July 2026, access to that funding is subject to a new and significantly more restrictive test. Funding applications must now demonstrate reasonable prospects of success, likely benefit to the worker and satisfy broader considerations about the financial sustainability of the system. Lawyers are required to provide evidence supporting those matters before funding will be approved.
In practical terms, this means some workers who previously received assistance will now face additional hurdles in accessing legal representation.

The reality is that workers’ compensation law is highly technical. Insurers are represented by experienced claims officers, legal teams and medical advisers. Limiting access to legal assistance risks creating an imbalance that may disadvantage injured workers seeking to enforce their rights.

One of the most significant changes introduced by the reforms is the greater emphasis on permanent impairment assessments.

A worker’s entitlement to ongoing benefits may now depend more heavily on whether they reach certain impairment thresholds. Decisions made during the assessment process can therefore have substantial long-term consequences.

A worker who fails to achieve the required level of permanent impairment may lose access to weekly payments, medical treatment and other benefits much earlier than expected.

For that reason, obtaining legal advice before participating in a permanent impairment assessment has become critically important.

Many workers are unaware that these assessments involve detailed medicolegal criteria that differ significantly from the way treating doctors assess injuries in everyday practice.

Historically, the workers’ compensation scheme recognised that injured workers should have access to independent legal representation when challenging insurer decisions.

While legal funding remains available, the new approval process requires more evidence, greater justification and additional scrutiny at every stage of a dispute.

As a result, some workers may find that disputes which would previously have been funded are now more difficult to progress.

The concern is not simply about legal costs. It is about access to justice.

Many successful workers’ compensation claims begin with an insurer decision that is later overturned after medical evidence is obtained or further investigations are conducted. If workers encounter barriers to obtaining legal representation at the outset, legitimate claims may never receive proper consideration.

Making a claim for psychological injury caused by work after 1 July 2026 is now significantly more difficult and is only available in limited circumstances.

Workers must now establish that actual bullying, harassment or overwork was a contributing cause of their psychological injury. In addition, the Whole Person Impairment (WPI) threshold required to pursue a work injury damages claim for psychological injury has increased to more than 25%.

In practical terms, this means very few injured workers will qualify to bring a negligence claim for a psychological injury in NSW, as the overwhelming majority of psychological injury claims will not reach the 25% WPI threshold.

This represents one of the most significant restrictions on psychological injury rights seen in the NSW workers’ compensation system in many years.

These changes do not apply to emergency service workers, including Police officers and Ambulance officers, who continue to benefit from separate protections within the legislation.

One clear lesson from these reforms is that injured workers should seek advice earlier rather than later.

Waiting until benefits have stopped or a dispute has reached an advanced stage can limit available options and make it more difficult to gather the evidence needed to support a claim.

Early legal advice can help workers:

• Understand their entitlements;
• Avoid procedural mistakes;
• Obtain appropriate medical evidence;
• Respond to insurer decisions effectively;
• Prepare for permanent impairment assessments; and
• Protect their future rights to compensation.

In our experience, many disputes can be resolved or avoided altogether when workers understand their rights from the beginning.

For our clients, the reforms reinforce the importance of obtaining specialist advice as soon as possible after a dispute arises.

At Garling&Co, we are already adapting to the new framework by ensuring evidence is gathered earlier, funding applications are prepared comprehensively, and clients understand how the reforms affect their individual circumstances.

The legal landscape has changed, but the fundamental principle remains the same: injured workers are entitled to fair compensation and support when injured in the course of their employment.

The NSW workers’ compensation system exists to protect workers, not to create barriers for them.

As these reforms begin to take effect, we will continue to advocate strongly for our clients and ensure they have the best opportunity to secure the benefits and compensation to which they are entitled.

The reforms commencing on 1 July 2026 place greater responsibility on injured workers to understand their rights, obtain appropriate evidence and seek legal advice at an earlier stage of their claim. With access to benefits and compensation increasingly linked to technical legal and medical requirements, the consequences of making a mistake have never been greater. Ensuring you receive specialist advice at the earliest opportunity may make a significant difference to the outcome of your claim and your financial future.

Other references

SIRA   State Insurance Regulatory Authority