Denied, not defeated: how to pursue a psychological injury claim under NSW’s new workers compensation laws

By Dr Anna Kiaos

Since 1 July 2026 it has become much harder to have a psychological injury claim accepted in NSW. Many workers who receive a denial will give up. That is understandable, but it is rarely the end of the road, and when injured workers walk away, the conditions that harmed them usually stay exactly where they are.

In my work investigating psychological injury claims, I meet people at the lowest point of their working lives. They have usually tried to raise concerns, often more than once. They have become unwell. They have found the courage to lodge a claim. Then, a letter arrives from the insurer saying that liability is denied.

Under the reforms that commenced on 1 July 2026, that letter is likely to become more common. The law now sets a much narrower gateway for primary psychological injuries, and it asks workers to prove more, with better evidence, through a more complicated process. For someone who is already unwell, the temptation to let it go is enormous.

I want to speak directly to those workers. A denial is a decision, not a verdict. There is a clear pathway to challenge it, there is free help available, and the evidence you gather along the way matters, both for your own claim and for the next person in the same team.

First, check which rules apply to you

The new rules apply to primary psychological injuries notified to the employer, or claimed, on or after 1 July 2026. They do not apply to police officers, paramedics, firefighters, coal miners or volunteers, and a psychological injury that arises from a physical injury is treated differently. If your injury was notified before 1 July 2026, the previous rules are likely to apply. The date of notification can be contested, so find any email, form or message that shows when you first told your employer.

Understand why the claim was denied

The insurer must explain its decision in a written notice, usually called a section 78 notice. Read it carefully, because the reason for the denial decides where you go next. Under the new law, a primary psychological injury is compensable only if:

·       a “relevant event” caused it, such as violence or the threat of violence, witnessing a traumatic incident, vicarious trauma, sexual or racial harassment, bullying or excessive work demands;

·       there is a real and direct connection between that event and your employment; and

·       employment was the main contributing factor to the injury.

Separately, no compensation is payable if the significant cause of the injury was reasonable management action, such as performance feedback, discipline or an investigation, taken in a reasonable way. Most denials will rest on one or more of these grounds, or on the insurer saying it does not have enough information to decide.

Eight steps to keep your claim alive

1.     Get free legal help early. You do not have to pay for advice. The Independent Review Office funds approved lawyers to act for injured workers through ILARS (Independent Legal Assistance and Review Service); call 13 94 76 or search for an IRO-approved lawyer on its website. The free Workers Compensation Advisory Service can also explain the process (02 8378 0521). ILARS funding is now subject to a merit test, which is another reason to start gathering evidence straight away.

2.     Ask the insurer for an internal review. This step is now required before you can take a dispute further, whether to the Industrial Relations Commission or the Personal Injury Commission. Use it. Explain clearly what happened and attach any evidence the insurer does not appear to have considered.

3.     Know which door you are going through. If the insurer still disputes that the conduct you experienced was bullying, excessive work demands, sexual harassment or racial harassment, you must first apply to the NSW Industrial Relations Commission (Form IRC 67) for a determination that it was “relevant conduct”. The Commission’s certificate is binding. If it finds in your favour, the insurer must issue a new decision within seven days, and any remaining disputes go to the Personal Injury Commission. Claims based on traumatic events, and denials on other grounds, go to the Personal Injury Commission.

4.     Build the evidence, starting with the workplace. This is the biggest change, and the one most workers do not know about. Whether conduct amounted to bullying, harassment or excessive work demands is now judged objectively. Your experience still matters, but only to the extent that it was reasonable. In practice, that means your account needs to be backed up by the facts of the workplace. For excessive work demands, the law lists the matters that must be considered, including the usual patterns of work in your industry, supervision and surveillance, your role and level of responsibility, whether you were paid for extra hours, the needs of the workplace, staffing levels and skill mix, industrial agreements, and repeated serious safety breaches.

5.     Keep what you are entitled to keep, and write things down. Your rosters, timesheets, payslips, position description, emails and messages you sent or received, complaints you made and the responses, and notes from meetings are all potential evidence. Make a dated timeline of what happened while your memory is fresh, and list the colleagues who saw it. Only keep material you are lawfully entitled to hold; your lawyer can request or compel the rest.

6.     Write your statement in your own words. The Personal Injury Commission’s rules now prohibit using generative artificial intelligence to write witness statements. Your statement must reflect your own knowledge and your own voice.

7.     Be ready for the “reasonable management action” argument. Insurers frequently argue that what happened was simply ordinary management. The law requires that management action be reasonable in substance and taken in a reasonable way. How a process was run, how it was communicated, its timing, and whether policies were followed are all relevant, and all capable of being proved with documents and witnesses.

8.     File everything up front, and look after yourself. Both commissions expect your evidence to be filed with your application, and later evidence may be refused or cause delay. Meanwhile, keep seeing your GP and treating practitioners. While the insurer is still deciding a conduct-based claim, you may be eligible for interim weekly payments at 75 per cent of your pre-injury earnings for up to 56 days, and up to $7,500 for early mental health treatment.

Why the facts of the workplace now decide these claims

Under the old rules, many psychological injury claims turned largely on medical opinion. Under the new rules, the first and hardest question is factual: what actually happened at work, and was it objectively bullying, harassment or excessive work demands? A treating doctor can describe your injury, but cannot prove your staffing levels, your hours, or whether a performance process was run fairly.

That is where a properly conducted factual investigation makes the difference. Gathering rosters, organisational charts, workload data, policies, complaint records and statements from colleagues builds the objective record that the law now requires. Where a worker has an ILARS-funded lawyer, the cost of a reasonably necessary investigation can be sought as a disbursement, with the IRO’s prior approval.

If you give up, the organisation does not have to change

It is worth saying plainly what happens when injured workers walk away. In my research and investigations, psychological injury claims cluster. They often come from the same teams, the same managers, the same chronic understaffing. Each claim that is abandoned is one less record of those conditions, and one less reason for the organisation to fix them.

Even if a compensation claim does not succeed, the organisation is not off the hook. Every employer in NSW has a legal duty under work health and safety law to identify and control psychosocial hazards, regardless of what happens to any individual claim. You can raise those hazards with SafeWork NSW (13 10 50).

Depending on your circumstances, there may also be other avenues, such as an anti-bullying or sexual harassment application to the Fair Work Commission while you are still employed, a complaint to Anti-Discrimination NSW or the Australian Human Rights Commission, or a claim on the income protection or total and permanent disability cover in your superannuation. Strict time limits apply to several of these, so get advice early.

You are not the problem

The new system asks a great deal of people at the moment they have the least to give. If you are in that position, please do not carry it alone. Get free advice, ask for the review, and start building the record of what happened. The evidence that proves your claim is the same evidence that shows what needs to change, and when workers keep going, organisations are far less able to look away.

About the author

Dr Anna Kiaos is the Founder and Principal of Mind Culture Life Australia. She is affiliated with the Discipline of Psychiatry and Mental Health at UNSW Sydney. Mind Culture Life Australia conducts factual investigations of psychological injury claims for law firms. Dr Anna Kiaos is the creator of the Culture Pressure Map™ - www.culturepressuremap.com

Important

This article is general information about the NSW workers compensation system as at November 2026. It is not legal advice. Every claim turns on its own facts and dates, and the rules and guidelines continue to be updated, so please obtain advice from an IRO-approved lawyer about your own situation. If you are in distress, contact your GP, Lifeline (13 11 14), Beyond Blue (1300 22 4636) or 1800RESPECT (1800 737 732).