The NSW government and opposition have agreed on workers’ compensation reforms targeting psychological injuries that will allow stalled legislation to pass parliament next year. 

The deal, which freezes average premiums for 18 months, backs compromise psychological injury whole person impairment payment thresholds put forward by independents.

Phased changes would lead to an initial increase in the threshold to 25% from July next year, after a jump to 31% was blocked by parliament.  

Other reforms include asking the chief psychiatrist to develop a new tool for measuring the severity of psychological injuries, which have increased in frequency and added to rising scheme costs.

Business NSW says a “do nothing scenario” would have meant premiums soaring 36% over three years and the political agreement is “an early Christmas present”.

Industrial Relations Minister Sophie Cotsis says the changes ensure early support to injured workers and a road to recovery and return to work.  

“It puts the scheme on the path to sustainability so that it can continue to care for injured workers and be affordable for business to fund,” she said.

Opposition leader Kellie Sloane, in the role since November 21, says certainty is required for small businesses, charities and workers, and the state needs a sustainable workers’ compensation system.

“As new leader, my priority was to reset negotiations with the Treasurer to stabilise premiums for business while strengthening protections for workers with psychological injuries,” she said. “Neither side achieved everything it sought. But this agreement represents a clear and material improvement on the government’s original position.” 

Ms Sloane says reforms still need to target rorts, inefficiencies and poor return to work outcomes that drive premium increases and productivity losses.

Unions NSW says evidence shows a psychological injury whole person impairment of more than 21% means someone has no capacity to work, but the reforms would ratchet up the income support threshold to 28% by 2029.

“We are thoroughly disappointed by this deal between the government and opposition, which forces traumatised workers to pay for the problems in the scheme,” acting secretary Thomas Costa said.

The Workers’ Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 is now expected to pass the state upper house in February.