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Welcome to the fifth edition of Sparke Compensation Quarterly. Workers’ compensation schemes have continued to undergo significant legislative and regulatory change over the past year. Government, regulators and policymakers have focused on balancing scheme sustainability, improving return-to-work (RTW) outcomes and responding to the growing prevalence of psychological injury claims. For claims managers, insurers and self-insured employers, understanding these changes is critical to ensuring compliance, managing claims effectively and anticipating emerging risks.

Legislative reforms continue to shape the operating environment for workers’ compensation stakeholders, often with significant practical implications for liability decisions, reserving, rehabilitation strategies and return-to-work planning. They span a range of areas, including claim eligibility, dispute resolution processes, permanent impairment assessment and employer obligations.

Updated guides

Sparke Helmore recently published a range of workers’ compensation guides for each Australian jurisdiction beginning 1 July 2026:  Workers' compensation guides

Commonwealth Compensation

On 12 December 2025, the Australian Government released the independent review of the Safety, Rehabilitation and Compensation Act 1988 (SRC Act). The review examined how the Comcare scheme could be reformed to improve outcomes for injured and ill workers and adapt to new and emerging workplace challenges, while maintaining financial viability. There were 124 recommendations relating to scheme design, coverage and exclusions, early intervention and claims handling, rehabilitation, and dispute resolution.

The proposed reforms represent evolution of current arrangements in terms of proposed reforms to key liability, coverage and exclusionary provisions. However, the combined effect of the reforms is expected to have an impact on the financial performance of the scheme, noting it is proposed that incapacity and permanent impairment compensation be increased, new heads of compensation for crisis payments be introduced, and the causation test to apply the reasonable administrative action exclusion be strengthened. 

In contrast, the review recommended wholesale changes to rehabilitation provisions which, if implemented, will represent a fundamental shift for employers and licensees within the scheme.  To bring the SRC Act in line with other jurisdictions, key recommendations include a streamlined injury notification/claim process, and the requirement to provide pre-liability support to injured workers, covering incapacity, medical expenses and rehabilitation. 

Alongside this, it is proposed that:

  • employers be subject to a statutory duty to intervene as soon as possible after an injury or incident or as symptoms emerge and are prohibited from making an offer of early support conditional on not making a claim for workers’ compensation
  • employer duties with respect to rehabilitation and return to work be substantially strengthened, with regulatory and enforcement powers and sanctions for non-compliance introduced
  • the delegated model of claims management for premium paying agencies be abolished
  • entry criteria for self-insurance licensees be tightened, and
  • broadened options for voluntary exit from the scheme (by way of increased scope for commutation) be introduced.

The government is yet to announce a position on the review, and no amendments to the SRC Act are currently before Parliament.

New South Wales

In response to increasing claim costs—particularly for psychological injuries—the NSW Government has introduced the most significant overhaul of the workers’ compensation scheme in more than a decade.

The Workers Compensation Legislation Amendment Act 2025 was assented on 24 November 2025 and delivered the initial tranche of scheme amendments. The Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2025 was assented in February 2026 and came into force on 1 July 2026.

These key legislative changes are supported by a new Workers Compensation Legislation Amendment Regulation 2026 and updated SIRA Workers Compensation Guidelines.

Psychological injury claims

Causation for a compensable psychological injury now requires a defined workplace ‘relevant event’. These have been divided into ‘trauma related events’ and ‘conduct related events’ and include bullying, racial or sexual harassment, excessive work demands, trauma or violence and indicatable criminal conduct violence. Where a claim is disputed on the basis of workplace conduct, the Industrial Relations Commission must first determine whether the alleged conduct occurred. Only after that determination can the matter proceed to the Personal Injury Commission. The insurer has 42 days to determine liability for conduct-based claims. If a decision is not made in that time, it may result in a ‘deemed’ acceptance of the claim. Once liability is accepted or deemed, back payments must be made within 21 days.

Higher threshold for medical and treatment costs

The statutory test for medical treatment costs shifts from ‘reasonably necessary’ to ‘reasonable and necessary’, raising the threshold for justifying ongoing treatment. This changes places greater emphasis on clear, defensible clinical reasoning and provides employers and insurers with a stronger basis to challenge continuing liability. 

Whole person impairment (WPI) thresholds from 1 July 2026

  • The WPI threshold for lump sum compensation for a psychological injury will increase from 15% WPI to 25% WPI from 1 July 2026. Further increases have been projected to 26% WPI from 1 July 2027 and 28% WPI from 1 July 2029.
  • Section 39A of the WCA is also amended to restrict weekly benefits once a worker reaches 130 weeks in respect of primary psychological injury, unless the worker is assessed as high needs (at least 21% WPI).
  • Workers with a WPI above 21% will be eligible for an additional 52 weeks of benefits from 1 July 2026, increasing to 26% WPI from 1 July 2027 and 27% WPI from 1 July 2029.
  • Weekly payments for psychological injuries are capped at 130 weeks unless these thresholds are met, representing a tightening of long-term entitlement access. Accordingly, fewer workers will qualify for long-term income support,

Eligibility settings and thresholds for accessing Work Injury Damages and extended benefits are being progressively tightened from 1 July 2026.

The amendments also include significant changes to the process of section 66 claims for both physical and psychological injuries, as it relates to a single principal assessment The changes require that an injured workers degree of permanent impairment is determined by one approved assessor rather than the prior system where both the insurer and the claimant obtained separate assessment.

Dust Diseases

The NSW Court of Appeal in Workers Compensation Nominal Insurer v Sako [2025] NSWCA 12 confirmed that s 140 uninsured liability under the Workers Compensation Act 1987 (NSW) does not apply to dust disease claims. The uninsured liability scheme therefore cannot be used by claimants suffering from dust diseases to recover damages from the Nominal Insurer where their employer lacked workers’ compensation insurance.

The ruling underscores the distinct statutory treatment of dust disease claims in New South Wales and has particular relevance amid rising silica-related claims. It confirms that uninsured employers create a potentially uncompensated exposure pathway not addressed by the workers’ compensation uninsured liability regime. For employers and insurers, the decision places renewed emphasis on maintaining appropriate insurance arrangements and preserving employment and exposure records, which remain critical in managing dust-related liabilities.

The Dust Diseases Tribunal of New South Wales Annual Report to the President and Year in Review 2025 have been published on the DDT website.

Victoria

Victoria has implemented significant reforms to its workers’ compensation framework, reflecting a broader national shift toward claimant experience, psychological health, and scheme sustainability. A substantial development has been the Workplace Injury Rehabilitation and Compensation Amendment Act 2025 (Vic), passed in July 2025. The legislation introduces a Code of Claimants’ Rights, designed to ensure injured workers and families are treated with dignity and to lift service standards across WorkSafe, agents and self-insurers. It also expands entitlements for dependants of deceased workers, including increased child pensions and new grief and loss payments, as well as broader access to family support services.

For employers, the reforms impose increased return‑to‑work obligations, including mandatory training and resourcing for return‑to‑work coordinators, with penalties for non‑compliance. These changes align with the government’s response to the 2022 independent review of WorkSafe’s management of complex claims.

In parallel, Victoria introduced the Occupational Health and Safety (Psychological Health) Regulations 2025, commencing 1 December 2025. Occupational Health and Safety (Psychological Health) Regulations 2025 | legislation.vic.gov.au These regulations impose enforceable duties to identify and control psychosocial hazards such as bullying, harassment and work pressure. This marks a significant shift, elevating psychological risks to the same regulatory footing as physical hazards.

From a claims perspective, national data indicates that while overall claim frequency has stabilised, mental health claims continue to rise, now comprising approximately 12% of serious claims and involving significantly longer absences from work. These claims are a key driver of increasing scheme costs and complexity.

Looking ahead, several trends are likely to shape the 2026-27 financial year. Ongoing cost pressures and premium sensitivity will remain central, with continuing questions over scheme funding levels and November’s election outcome is likely to significantly influence Victoria’s workers’ compensation reform agenda.

Queensland

The High Court’s decision in AA v The Trustees of the Roman Catholic Church for the Diocese of Maitland-Newcastle [2026] HCA 2 made waves during the 2025-26 financial year. The High Court held that common law non-delegable duties of care can be breached by intentional criminal acts of a delegate, overturning New South Wales v Lepore (2003) 212 CLR 511 and expanding institutional liability in that respect.

Perhaps prompted by AA, the Civil Liability (Holding Institutions Accountable for Child Abuse) Amendment Bill 2026 was introduced to the Queensland Parliament in April 2026, which, if passed, will allow institutions to be held vicariously liable for child abuse claims by extending vicarious liability beyond employment. The Justice, Integrity and Community Safety Committee is due to table its report on the Bill in October 2026.

Given AA’s potential impacts on other categories of non-delegable duties of care, we will continue to monitor future developments following the decision, particularly as it pertains to the employee/employer relationship.

The 2025-26 financial year also saw updated regulations introduced in Queensland, including the Workers’ Compensation Rehabilitation Regulation 2025, the Civil Liability Regulation 2025, and the Personal Injuries Proceedings Regulation 2025.  From 1 September 2025, new Law Practice Certificate and PIPA Notice of Claim forms were introduced.

The 2025 National Return to Work Survey results showed that workers with psychological injuries are less likely to return to work that those with physical injuries. In response to the increasing number of psychological injury claims and increased reporting of fraud, a review of Queensland’s workers’ compensation scheme is currently underway. The review is expected to be completed in the first half of the 2026-27 financial year.

South Australia

The 2025-26 financial year continued to see growth in the number and complexity of claims and disputes both lodged under the registered and self-insured Return to Work Scheme.

In the past year, we have seen the 3rd edition of the Impairment Assessment Guidelines (IAGs) commence, with effect from 1 October 2025. These new IAGs contain substantive and procedural changes in the assessment of permanent impairment. We expect to see increased disputation relating to some of these changes, particularly where they may impact significantly on an injured worker’s entitlements to lump sum compensation, which remains a significant portion of entitlements under the Return to Work Act 2014 (SA) (RTW Act). A revised Impairment Assessor Accreditation Scheme is now in place and is complementary to the IAGs.

We continue to see high numbers of claims for psychiatric injuries, with modest growth in the number of claims being lodged on previous years. These matters continue to result in a reasonable level of disputation, both by workers and their employers, although the mandatory conciliation process applied in the South Australian Employment Tribunal (SAET) continues to demonstrate success in achieving early resolution of disputes by way of alternate dispute resolution.

Trial and appeal litigation has remained steady, with 147 decisions being delivered by the SAET in the 2025-26 financial year (across all jurisdictions and including interlocutory hearings) as compared to 117 in 2024-25 and 114 in 2023-24. Anecdotally, we continue to see a positive clearance rate, with steady numbers of matters resolving without proceeding to trial.

The anticipated appeal to the Court of Appeal in the matter of Vercoe resolved without the matter proceeding to an appeal hearing and decision, and as such, the Full Bench decision (Local Government Association (City of Charles Sturt) v Vercoe & Return to Work Corporation of South Australia [2025] SAET 135) remains undisturbed. This decision makes it clear that careful consideration of the factual circumstances in which an injury is alleged to have occurred is required in order to assess whether an injury is compensable under s 7 of the RTW Act.

Effective from 29 January 2026, amendments to the Labour Hire Licencing Act 2017 (LHL Act) require all labour hire providers to become licenced and expands the meaning of ‘labour hire service’ to include all work involving labour hire, rather than previously prescribed work. These changes, in conjunction with the changes effected to s 18 made by the Return to Work (Employment and Progressive Injuries) Amendment Act 2024 (the majority of which came into effect on 1 December 2024), are likely to have ongoing impacts on employers and host employers and their obligations to provide suitable duties to injured workers. The definition of ‘host employer’ in s18 of the RTW Act essentially has been broadened (via the LHL Act) to include any employer who uses labour hire. We expect this to be an ongoing area of focus and potential disputation.

Western Australia

The past 12 months have marked a period of substantial reform in Western Australia, following the commencement of the Workers Compensation and Injury Management Act 2023 (WA) (the Act) on 1 July 2024. This legislation represents a complete modernisation of the scheme, replacing the 1981 framework and continuing to shape practice through 2025-26.

Key reforms have focused on improving worker entitlements and streamlining claims administration. Notably, medical and health expense limits have been significantly increased, and the reduction (‘step‑down’) in weekly compensation payments has been deferred from 13 to 26 weeks, providing longer income protection.

The Act also introduces tighter claims timelines, requiring insurers to determine liability within defined periods (generally 14-28 days), failing which provisional payments must commence. Coverage has been broadened to better reflect modern working arrangements and claim processes have been simplified to improve efficiency and certainty.

Complementing these changes, amendments to the work health and safety regulations and alignment with the Work Health and Safety Act 2020 (WA) have reinforced employer obligations, particularly in relation to workplace risk management.

Psychosocial risk and mental injury

A defining feature of the WA landscape is the strengthened focus on psychosocial hazards. Employers are now required to identify, eliminate or minimise psychological hazards such as bullying, workload pressure and harassment under binding WHS duties and a 2024 WA Code of Practice.

Scheme trends and outlook

Looking ahead, key trends for the coming year include:

  • continued growth in psychological injury claims
  • increasing claim severity due to extended benefits and medical costs
  • upward pressure on premiums, and
  • heightened regulatory scrutiny of employer risk management practices.

In summary, Western Australia’s reformed scheme is delivering broader worker protections and faster claims processes, but with a clear shift toward increased employer compliance obligations and a sustained focus on managing mental health risk.

ACT

Some of the key trends we have seen in the 2026 financial year have included rising claims costs and extended durations, growth in the complexity of claims, and a steady frequency in psychological injury claims. Safe Work Australia data from 2025 shows that the ACT had (together with Queensland) the highest proportion of injured workers who were working. That same data also reveals that, as compared with data from 2021, there was a decline in the RTW rate at a national level. National return to work survey | dataswa

Based on current trends and recent data, we forecast that in the next financial year:

  • due to the increase in mental health-related claims, the costs and durations of those claims will remain on an upward trajectory
  • the RTW rate will continue to decline or otherwise remain steady, and
  • serious injury claims will continue to emerge from high-risk industries.

Update to construction site safety breach

In Agius v Fed Consulting Services Pty Ltd; Agius v Stephen Gelo (No 2) [2026] ACTMC 9, Fed Consulting Services Pty Ltd (Fed Consulting) and its director were convicted and fined following a serious workplace incident that happened in November 2022 at a construction site in Gungahlin, ACT. Each of the defendants were convicted for failing to comply with their duties under the Work Health and Safety Act 2011 (ACT) (WHS Act). The defendants were fined a combined sum of $110,000 and ordered to pay the informant’s costs of $5,740.50.

A summary of the decision (Agius v Fed Consulting Services Pty Ltd; Agius v Gelo [2026] ACTMC 2) in which each of the defendants were found guilty of committing a Category 2 offence can be found in Sparke Compensation Quarterly - Issue 4.

Northern Territory

During the 2025-26 financial year, we covered:

Work health and safety

NT WorkSafe (NTWS) was active during the year, including:

These Codes provide practical guidance to employers, workers and other duty holders on managing health and safety risks.

  • Commencing prosecutions in June 2026 against:
    • the Department of Health, in relation to the death of a patient who accessed and inhaled deodorant while involuntarily admitted to a facility, resulting in fatal injuries, and
    • a Central Australian Aboriginal corporation in connection with two vehicle rollover incidents that allegedly injured two workers and resulted in the death of a third worker.

Workers’ compensation

During the year, there were no amendments to the (NT) Return to Work Act. However, the NT Work Health Court, Supreme Court and Court of Appeal delivered a number of important judgements.

  • In Wilson v Northern Territory of Australia, the NT Work Health Court considered the reasonableness of home modifications. Mr Wilson lived in a split-level home at Wulagi. Because of increasing mobility difficulties, he sought funding under s 78 RTWA for modifications including converting a carport, converting a laundry and constructing a downstairs bedroom and ensuite. Mr Wilson also owned a ground-level property in Lyons. The Court held the Lyons property was not realistically available, moving would create additional delay and expense and the Wulagi modifications remained reasonable and necessary. A worker is not necessarily required to relocate simply because another dwelling exists. The Court looks at actual availability, timing, practicality, family circumstances and rehabilitation benefits. Reasonableness under s 78 is assessed holistically, not by comparing construction costs alone.
  • In Slade v CGH Group Pty Ltd, the NT Supreme Court considered a psychological injury may be compensable where it arises from a worker's genuine perception of danger, contamination or injury stemming from a real workplace event, even if the perception later proves mistaken. A mental injury can arise from fear of contamination, fear of exposure and perceived physical harm even where no actual physical injury is ultimately proven. The perception must arise from a real workplace event, not a delusion unrelated to work. Expert psychiatric opinions must be founded on facts actually established by the evidence.
  • In Yao v Northern Territory of Australia, the claimant was employed in the Northern Territory Public Service and returned to work in 2019 after a lengthy period of leave. He subsequently alleged that he had suffered a psychiatric injury arising from, among other things, what he perceived to be micromanagement. The Court emphasised that the reasonableness of management must be assessed objectively, and that the management process must be considered as a whole. Management action does not have to be perfect to be reasonable. A course of action may still constitute ‘reasonable action’ even where particular steps are omitted or where individual steps may be open to legitimate criticism.  Importantly, any alleged ‘unreasonableness’ must be established through an objective assessment of the management actions in question, rather than by the worker’s subjective perception of them. This is consistent with the broader principle that a psychiatric condition caused by an employee’s perception of workplace events—provided those events actually occurred—including the perception of a hostile workplace, is capable, as a matter of law, of constituting a mental injury ‘arising out of or in the course of employment’.
We would like to acknowledge the contribution of Alexandra Woodland, Karen Teixeria, George Roussos, Rani Aria Retnam, Robyn Brewster.
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