NSW now covers a psychological injury only if a listed event caused it. Every other Australian scheme starts from the other end

We have drawn on Safe Work Australia’s biennial Comparison of Workers’ Compensation Arrangements in Australia and New Zealand before, for journey cover, income replacement and firefighter cancers. Table 4.22, on pages 150 to 153, sets out how each of the twelve schemes treats psychological injury. The report describes the schemes as at 31 December 2025, and for NSW that date matters: the changes Parliament passed took effect six months later, so the comparison’s NSW entry no longer describes the law.

What NSW changed on 1 July

We read the Workers Compensation Act 1987 on the NSW legislation site, comparing the version in force from 12 June 2026 with the version from 1 July 2026. Three changes matter most.

Cover now depends on a list. New section 8O says no compensation is payable for a primary psychological injury unless a relevant event caused it, there is a real and direct connection between that event and the job, and employment is the main contributing factor to the primary psychological injury. Section 8G defines a relevant event as violence or a threat of it, indictable criminal conduct, witnessing a traumatic incident or a dead or seriously injured person at one, vicarious trauma, sexual harassment, racial harassment, bullying, excessive work demands, or another event the regulations prescribe. A psychological injury that follows a physical one (a “secondary” injury) is defined separately and is not subject to the list.

The management-action exclusion got wider. Under the old section 11A, as the comparison records it, a psychological injury was excluded if it was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer over transfer, demotion, promotion, appraisal, discipline, retrenchment, dismissal or benefits. The section now excludes an injury if the significant cause of the psychological injury was reasonable management action, or the worker’s expectation or perception of it. New section 8F lists what counts as management action, from performance feedback to investigating misconduct.

Weekly payments stop earlier. Until July a psychological injury ran on the same clock as any other: the comparison’s income table has NSW weekly payments continuing to 260 weeks, and beyond that only for workers above 20 per cent permanent impairment. Section 39A now ends weekly payments for a primary psychological injury after 130 weeks unless the worker’s permanent impairment is at least 25 per cent. Section 39B keeps them going for workers between 21 and 25 per cent only if the insurer assesses them as having no work capacity, or they are back at work at least 15 hours a week earning at least $225. The threshold for a lump sum, in section 65A, is unchanged at 15 per cent.

How the twelve schemes compare

How each scheme limits compensation for psychological injury, and the impairment threshold the comparison lists for it. Our summaries of Table 4.22, as at 31 December 2025, except the second NSW row, which is from the Act in force since 1 July 2026. “None” and “N/A” are the report’s own entries.

Victoria’s exclusion reaches beyond management action. It also excludes an injury predominantly caused by work related stress or burnout that has arisen from events that may be considered usual or typical and reasonably expected to occur in the course of the worker's duties. That is still an exclusion: the injury is covered unless the insurer shows it falls inside it. New Zealand’s entry starts from the other end: Cover does not exist for mental injuries if the mental injury is not caused by physical injuries, a sudden traumatic event or certain criminal acts.

Our view: the list fits the traumatic cases and narrows cover for the gradual ones

This is opinion, built on the provisions above. The NSW list covers the obvious ways a job can cause harm through an event: assault, a death on site, harassment, vicarious trauma. What it narrows is the slow case, where nothing dramatic happens and a worker is worn down by how the work is designed. That case now has to fit “bullying” or “excessive work demands”, and the Act gives both an objective test (section 8L) and a list of matters an insurer considers for excessive demands (section 8M). A claim has to establish that, as well as clear the wider management-action exclusion.

The awkward fit is with prevention. WHS law asks duty holders to manage psychosocial hazards as a class, including high job demands, low job control and poor support (see our psychosocial hazards explainer). In NSW, the harm the prevention duty covers is now wider than the harm the compensation scheme pays for. A government can reasonably decide its scheme cannot carry every psychological claim. But a worker injured by a hazard their employer was legally required to manage, but which is not on the list, is now more likely to fall outside the NSW scheme than outside most others.