NSW Workers Compensation for Psychological Injury: What You Can Claim
If a psychological injury from your job in New South Wales has left you unable to work, the practical question is rarely abstract: what can you actually claim? Workers compensation payouts for psychological injury are not one lump sum — they’re separate entitlements that switch on and off depending on how your claim was made, how long you’ve been off work, and how your impairment is assessed. This guide sets out what a NSW worker can claim today, including the rules that changed for claims first notified on or after 1 July 2026.
This covers primary psychological injury — caused directly by something that happened at work, not a psychological reaction to a physical injury. It doesn’t apply to exempt workers such as police, paramedics and firefighters, or to coal miners, volunteers and dust-disease claims (SIRA, Psychological injuries — a guide for workers and employers). If you’re unsure which category applies to you, your insurer, a union representative or SIRA can tell you.
What has to be true for a psychological injury to be compensable
Not every work-related stress or unhappiness is a compensable claim. A primary psychological injury is only compensable if all three apply: it was caused by a defined “relevant event”, there’s a real and direct connection between that event and your employment, and employment is the main contributing factor (SIRA, Psychological injuries guide, cited above).
Relevant events fall into two groups. Relevant conduct — bullying, sexual harassment, racial harassment, or excessive work demands — has its own claim pathway, below. Other relevant events include an act or threat of violence, indictable criminal conduct, witnessing a traumatic incident (a violent act, serious crime, natural disaster, fire, explosion or motor crash likely to cause death or serious injury), vicarious trauma from repeated exposure to others’ trauma, and the death of a person in your direct care. A psychological injury caused by ordinary interpersonal friction or general work stress, outside this list, generally will not be compensable.
Why some claims are knocked back: reasonable management action
A psychological injury is not compensable where the significant cause was “reasonable management action” carried out reasonably — even where it wasn’t the only cause. The 2026 reforms expanded this exclusion to cover a broad range of ordinary employer conduct done reasonably: managing absences, performance feedback, investigating misconduct, disciplinary action, transfer, demotion, redeployment, promotion, retrenchment or dismissal, and implementing workplace policies (SIRA, Workers Compensation Reform FAQs). The reforms also added an objective test for whether conduct amounts to bullying, harassment or excessive work demands, rather than relying only on how it felt to the worker.
In practice, this is the line between claims that succeed and fail: a claim built around a documented, defined relevant event is assessed very differently from one built around dissatisfaction with a manager’s ordinary decisions.
How to make a claim, step by step
Tell your employer as soon as possible. Your employer must notify their insurer within 48 hours of becoming aware. You’ll need a medical certificate from a treating doctor identifying a mental or psychiatric disorder — this underpins the claim, much as a certificate of capacity underpins a physical injury claim.
From here, the process splits in two. A relevant conduct claim (bullying, harassment, excessive demands) needs a claim form; the insurer then has 42 days to decide liability, or it’s taken as accepted. Interim payments start within 7 days of the completed claim form — 75% of your pre-injury average weekly earnings (PIAWE), less earnings if you’ve returned to some work — plus up to $7,500 for interim treatment (excluding in-hospital care). If the claim is accepted, weekly payments move to the full rate of up to 95% of PIAWE within 7 days, with a back-payment of the difference within 21 days. For other relevant events — violence, criminal conduct, witnessing a traumatic incident, vicarious trauma, or a death in your care — there’s no 42-day wait: insurers must start provisional weekly payments within 7 days of notification, absent a reasonable excuse (SIRA, Psychological injuries guide).
What you are paid while you cannot work
For the first 13 weeks, with no work capacity you can receive up to 95% of your PIAWE; with some capacity, it’s 95% less current earnings (Workers Compensation Act 1987 (NSW) s36, via SIRA, Weekly payments guide). From week 14 to 130, that steps down to up to 80% with no capacity, or up to 95% less earnings if working 15+ hours a week (s37). A statutory maximum applies throughout — $2,662.10 a week from 1 April 2026 to 31 March 2027 (SIRA, Workers compensation benefits guide).
After week 130, psychological injury claims notified on or after 1 July 2026 diverge from the standard 260-week structure: continuation instead depends on your assessed whole person impairment (WPI):
| WPI assessment | Weekly payments | Work injury damages |
|---|---|---|
| 0–20% | Cease at 130 weeks | No entitlement |
| 21–24% | Up to 130 weeks, then a further 52 weeks (to week 182) at 60% of PIAWE, if no work capacity or working 15+ hrs earning $225+ a week | No entitlement |
| 25–30% | Continue to retiring age | May be entitled to claim |
| 31%+ | Continue to retiring age | May be entitled to claim |
Medical and related treatment generally runs for one year after weekly payments stop. A 21–24% WPI assessment also gives access to a return-to-work intensive support program of up to 12 months, which SIRA says it is developing, and 31%+ carries lifetime treatment access (SIRA, Psychological injuries guide). If your injury was notified before 1 July 2026, this table doesn’t apply — you continue under the prior 260-week structure, and payments that stopped for not reaching 21% WPI may resume if a later assessment shows you’ve now reached it.
Medical and psychological treatment costs
Under an accepted claim, the insurer — not you — pays for reasonably necessary treatment connected to the injury, including psychology. HealthPlex’s own psychology pages put it plainly: where care is funded by a workers compensation or CTP insurer, there’s no out-of-pocket cost to you, and no separate Mental Health Treatment Plan is needed, since funding sits with the scheme, not Medicare. AHPRA-registered psychologists see people for workplace psychological injury at HealthPlex Chester Hill and Chullora, and now also at HealthPlex’s Illawarra clinic in Barrack Heights.
Before a claim is accepted, up to $7,500 of interim treatment may be available for a relevant conduct claim, as above. Outside a claim, a GP Mental Health Treatment Plan and a valid referral can attract a Medicare rebate for up to 10 individual psychology sessions a calendar year (Department of Health, Better Access initiative). These are separate from, and don’t reduce, the up to 5 allied health services a year that a GP Chronic Condition Management Plan shares across every discipline (Services Australia).
Lump sum compensation and work injury damages
Separate from weekly payments, a permanent impairment lump sum under section 66 of the Workers Compensation Act 1987 (NSW) is available once your psychological injury reaches at least 15% WPI, assessed against the Psychiatric Impairment Rating Scale. SIRA has confirmed there is no change to this 15% threshold under the 2026 reforms (SIRA, Psychological injuries guide).
Work injury damages is a different, separate entitlement — a claim against your employer for negligence, on top of statutory benefits — with a higher, newer bar. You must show employer negligence and meet a WPI threshold of at least 25% for primary psychological injuries notified on or after 1 July 2026, a threshold the reform legislation raises further for injuries notified in later years. If your injury was notified before 1 July 2026, the previous 15% threshold still applies (SIRA, Workers Compensation Reform FAQs). This is a matter for a lawyer — the Independent Review Office (IRO) can help NSW workers get one.
If your claim is declined or you disagree with a decision
If an insurer disputes liability, it must explain the decision in writing and give 2 weeks’ notice before benefits stop. You can ask for a review: the insurer must set out the process and timeframe within 2 business days, and complete it — by someone more senior, uninvolved in the original decision — within 14 days (SIRA, Psychological injuries guide). Still unhappy? The Independent Review Office is the NSW agency set up to help, and some disputes go to the Industrial Relations Commission or the Personal Injury Commission. None of this replaces individual legal advice on your own claim — it’s where to start.
Getting back to work is also part of what a claim provides — see our guide to coordinated return-to-work models for psychological injury, and how to choose and fund a psychologist under a NSW workers compensation claim. Employers can read about injury management, how claim duration drives cost, our analysis of psychological injury as Australia’s costliest claim category, and 2026 psychosocial hazard duties.
GPs, case managers and insurers can also refer a worker to HealthPlex directly, with treatment coordinated against the return-to-work plan.
Frequently asked questions
How much compensation can I get for a psychological injury in NSW?
It depends on the entitlement, not a single number: weekly payments (up to 95% of PIAWE in the first 13 weeks, stepping down after), treatment costs, a lump sum once you reach 15% whole person impairment (WPI), and — if your employer was negligent — work injury damages once you reach the applicable WPI threshold (25% for claims notified on or after 1 July 2026). There’s no fixed “psychological damage” payout figure.
What weekly payments will I get while I can’t work?
Up to 95% of PIAWE for the first 13 weeks with no work capacity, stepping down to up to 80% from week 14 to 130. After week 130, for a claim notified on or after 1 July 2026, continuation depends on your assessed WPI — payments generally cease at 130 weeks below 21% WPI, extend to week 182 at 21–24% WPI, and can continue to retiring age at 25% WPI or above.
Can I get a lump sum for a psychological injury?
Yes, once permanent impairment is assessed at 15% whole person impairment (WPI) or more under section 66 of the Workers Compensation Act 1987 (NSW). SIRA confirms this 15% threshold hasn’t changed under the 2026 reforms, unlike the work injury damages threshold, which has risen for newly notified claims.
What makes a psychological injury or stress claim succeed?
A defined “relevant event” — bullying, harassment, excessive work demands, violence, or witnessing a traumatic incident — with a real and direct connection to your employment, where employment is the main contributing factor. Claims are far less likely to succeed where the significant cause was reasonable management action carried out reasonably, such as an ordinary performance review or restructure.
What if my psychological injury claim is declined?
The insurer must explain its decision in writing and give 2 weeks’ notice before benefits stop. You can ask for an internal review, completed within 14 days by someone more senior and uninvolved in the original decision. Still unhappy? The Independent Review Office (IRO) can help, including access to an approved lawyer.
Can I see a psychologist while my claim is still being decided?
Often yes. A relevant conduct claim (bullying, harassment, excessive demands) carries up to $7,500 of interim treatment funding during the insurer’s 42-day decision period. Outside a claim, a GP-issued Mental Health Treatment Plan and referral can fund Medicare-rebated sessions in the meantime — a separate pathway from workers compensation funding.
Alex W. writes on occupational health, injury management and workers’ compensation policy for HealthPlex, drawing on the company’s clinical teams across its national network of occupational and allied health clinics.
General information about workers compensation entitlements for psychological injury in NSW, current as at 2 September 2026; not a substitute for individual legal or clinical advice on your own claim. Scheme rules, thresholds and timeframes change — confirm current details with SIRA, your insurer, or the Independent Review Office before relying on them.