The Workers Compensation Legislation Amendment Act 2025 and its 2026 regulation are the biggest change to NSW workers compensation since 2012. Most of the public debate focused on psychological injury claims, but the changes to how permanent impairment is assessed affect every injured worker, physical or psychological, and they change the strategy behind lump sum claims. SIRA maintains a reform information hub and a dedicated explainer on the assessment of permanent impairment from 1 July 2026, which are the basis for what follows.
1. One principal assessment per injury
From 1 July 2026, most workers get a single permanent impairment assessment per injury. That one figure, the principal assessment, is then used to decide everything: whether weekly payments continue past 130 weeks and past five years, how long medical expenses are paid, the amount of the section 66 lump sum, access to a commutation, and whether you can sue for work injury damages. Previously, the number could be contested and re-assessed for different purposes. Now it is locked in.
The practical consequence is that timing is everything. An assessment obtained too early, before your condition has genuinely stabilised, produces a number you are stuck with for every downstream entitlement.
2. Independent legal advice is now compulsory before assessment
A worker must obtain independent legal advice before being examined by a permanent impairment assessor. The advice must cover the effect of the assessment on all compensation entitlements and whether independent financial advice is also warranted. Legal advice is also required before entering into any permanent impairment agreement with the insurer. Funding for this advice is generally available through the Independent Review Office’s ILARS scheme, although the reforms also introduced new eligibility criteria for ILARS funding, so approval is no longer automatic.
3. No more complying agreements
Before 1 July 2026, a worker and insurer could sign a section 66A “complying agreement” fixing the degree of impairment. No new complying agreements can be made from 1 July 2026. Agreements signed before that date remain binding for all purposes. The mechanism has been replaced by the principal assessment and a “permanent impairment agreement” that follows it.
4. Further assessment only for unexpected and material deterioration
You can only be re-assessed if both you and the insurer agree that there has been an unexpected and material deterioration. Both limbs must be satisfied: the deterioration was not anticipated at the time of the last assessment, and it has increased your WPI by at least a further 10 percentage points. Age-related deterioration is expressly excluded. The insurer must respond to a request within 21 days. A worker assessed at 18% whose condition worsens to 26% has not met the test.
5. A hard deadline of 1 July 2028 for pre-reform assessments
If you were assessed, or reached an agreement on your WPI, before 1 July 2026 but have not yet claimed your lump sum, that pre-reform figure becomes your principal assessment and you must lodge the lump sum claim before 1 July 2028. Miss that date and the entitlement is gone. Insurers are supposed to contact affected workers, but do not rely on it.
6. The interim period and what comes in mid-2027
From 1 July 2026 to around June 2027 the existing process for arranging an assessment continues, with the added requirement of prior legal advice. From mid-2027 a new joint assessment process and new approval requirements for assessors will start. SIRA has said further detail will be released before June 2027. Workers who are approaching stability in the next twelve months face a judgement call: assess under the interim rules, or wait for the new process.
7. The psychological injury thresholds, correctly stated
For a primary psychological injury notified or claimed from 1 July 2026 (see SIRA’s psychological injury guidance):
- The claim must be caused by one or more “relevant events” (violence or threats, indictable criminal conduct, witnessing a traumatic incident, vicarious trauma, death of a person in your care, bullying, sexual or racial harassment, or excessive work demands) and employment must be the main contributing factor.
- Lump sum compensation (section 66): still 15% WPI.
- Work injury damages: at least 25% WPI, rising to more than 26% from 1 July 2027 and at least 28% from 1 July 2029.
- Weekly payments beyond 130 weeks: at least 21% WPI unlocks a further 52 weeks at 60% of pre-injury earnings; 25% or more (on the same escalating scale) unlocks continuing payments; more than 30% is the highest-needs band with payments to retirement age.
- Medical expenses: cut off 12 months after weekly payments cease unless WPI is more than 30%.
SIRA’s own data, reported by Healthed, illustrates the effect. In the 2024-25 accident year, 1,514 NSW workers with a primary psychological injury were assessed at 15% or more, but only 88 reached 25%. So most psychologically injured workers will still qualify for a lump sum, but fewer than 6% of them will be able to bring a damages claim.
