NSW Workers Compensation Reform Update: Draft Regulations and Guidelines Released

Draft regulations and guidelines to support the implementation of the Workers Compensation Legislation Amendment Act and the Workers Compensation (Modernisation and Reform) Act (the Amendment Acts) were released for public consultation on 20 April 2026.

The reforms introduce significant changes to how claims are managed, how injured workers are supported, and what employers and insurers must do to comply.

The draft Workers Compensation Legislation Amendment Regulation 2026 and the proposed Workers Compensation Guidelines (April 2026) provide further guidance on how the reforms will operate in practice.

The consultation period for the draft regulations and guidelines closes on 15 May 2026.

This article focuses on some of the main changes contained in the draft regulations and guidelines, particularly those affecting insurers and employers.

A Market Practice and Premiums Guideline has also been released for consultation. This article does not address that guideline, or amendments to employer excess payments.

1. A new claims pathway for psychological injury

One of the most significant changes introduced by the Amendment Acts is the introduction of a dedicated pathway for claims involving relevant conduct — defined as bullying, excessive work demands, sexual harassment or racial harassment in the workplace.

Under this new regime:

• Claims involving relevant conduct require workers to provide a completed claim form and detailed particulars of each alleged incident, including dates, times, locations, people involved, and the names of any witnesses. 
• A relevant conduct claim is not formally lodged, and payment obligations do not commence, until the worker has provided all required information. 
• If a claim is incomplete, the insurer has three days to notify the worker of this and clearly explain the actions the worker needs to take to complete the claim.
• Once a complete claim is received, insurers must make a liability decision within 42 days.
• When making a liability decision, insurers must also take into account relevant information held by the employer, including any audio and video recordings.

2. A defined list of treatments that are no longer payable

The Amendment Acts change the definition of compensable medical and treatment expenses from ‘reasonably necessary’ to ‘reasonable and necessary’.

The regulations indicate this change will not commence until around October 2026. Ahead of that date, the draft regulation introduces an exclusion list of medical treatments and services that employers and insurers are not required to fund. This provides clarity and removes the need to assess these treatments on a case-by-case basis against the new ‘reasonable and necessary’ test.

Excluded treatments include:

• Alternative therapies such as crystal therapy, hypnotherapy, kinesiology, reflexology, and reiki.
• Wellness retreats and life coaching.
• Massage, unless prescribed by a registered health practitioner.
• Cannabinoid and GLP-1 medications.
• General fitness, social or recreational activities, unless prescribed by a health practitioner.
• Services associated with companion animals (other than recognised assistance animals), such as food and veterinary costs.

At the same time, the draft regulation sets a clearer test for what medical treatment must be funded. Treatment must be primarily directed at the worker's injury, be clinically justified, and represent value for money - meaning comparable benefits cannot be achieved at a lower cost.

3. Changes to permanent impairment claims

The amendments introduce a more structured framework for permanent impairment assessments and payments:

• The Amendment Acts provide that Workers will now be entitled to one principal assessment of their permanent impairment, and only one further assessment in limited circumstances. This applies where the worker's condition has deteriorated in a way that was not foreseeable at the time of the last assessment, and that deterioration amounts to an increase of at least 10 percentage points in permanent impairment. Age-related deterioration does not count.
• The draft regulation provides that if an insurer does not respond to a worker's request for agreement to a further assessment within 21 days, the insurer is deemed to have agreed to the request. This is an automatic outcome. No further action is required by the worker.
• Importantly, the draft regulation contains a new critical deadline which applies to existing permanent impairment assessments. Where a worker has a permanent impairment assessment on file before the commencement day (a date yet to be announced), they must make their lump sum claim by 1 July 2028, failing which the entitlement is lost. 

4. A new commutation scheme for older claims

Workers with injuries sustained before 1 January 2023 may be eligible to have their ongoing compensation entitlements converted into a single lump sum payment, known as a commutation. Key features of the new scheme include:

• Workers have 12 months from the commencement day (yet to be announced) to submit an expression of interest.
• If an employer receives an expression of interest from a worker, it must forward it to the insurer within three business days.
• Insurers must respond to expressions of interest within 10 business days, confirming receipt and providing specific information about the process.
• For commutations over $100,000, the insurer must fund independent financial advice (up to $2,000) for the worker before the agreement can be finalised.
• Commutation agreements must be approved within 24 months of the scheme's commencement date. After that period, no new commutations will be approved.
• Workers with catastrophic injuries, including serious spinal cord injuries, severe traumatic brain injuries, significant burns and permanent blindness, cannot commute their medical expense entitlements.

5. Employer obligations at medical appointments

Effective from commencement (a date yet to be announced), employers are prohibited from attending a worker's medical treatment appointments or medical examinations. This applies to all appointments from commencement day onwards, regardless of whether:

• the appointment was booked before the law changed;
• the employer has previously attended appointments in the same claim; or
• the appointment is part of an ongoing course of treatment.

6. Higher benefit amounts 

The draft regulation significantly updates the dollar amounts that apply to statutory compensation entitlements. Increases include:

• The death benefit rising to approximately $990,350.
• The weekly compensation cap increasing to approximately $2,662.10.
• Lump sum amounts are also increasing.
• Several indexed amounts have been marked ‘to be confirmed’.

Where to from here?

The draft regulations and guidelines are currently in a public consultation period until 15 May 2026.

You can provide your views and feedback at: www.haveyoursay.nsw.gov.au/wc-reform  

After the public consultation period is complete, the final regulations and guidelines will be announced.

In addition, we await the government’s announcement of the commencement dates for the Workers Compensation Legislation Amendment Act 2025 and the Workers Compensation (Modernisation and Reform Act) 2026.

If you would like further information regarding the amendments, please reach out to a member of our Employers Liability team.

This article provides a general summary of the draft Workers Compensation Legislation Amendment Regulation 2026 and proposed Workers Compensation Guidelines (April 2026), which are currently in public consultation. The reforms are subject to change before finalisation. This article does not constitute legal advice. For advice specific to your circumstances, please contact a member of our team.