NSW Workers Compensation Reforms: What These Changes Mean for Workplace Rehabilitation

The NSW workers compensation system is undergoing a number of significant changes throughout 2026, with further reforms coming into effect from 1 October 2026. One of the key changes is the introduction of a new “reasonable and necessary” threshold for medical and related treatment, hospital treatment, ambulance services and workplace rehabilitation services.

The changes are part of broader reforms to the NSW workers compensation scheme and will affect workers, employers, insurers and service providers. While the practical application of the reforms will continue to develop, understanding what is changing can assist key stakeholders in preparing for the next stage of the NSW workers compensation system. This blog will discuss these new reforms, what the changes will be and how employees, employers and workplace rehab providers will be affected.

What is Changing From 1 October 2026?

From the 1^st of October 2026, the threshold used to determine whether an employer is liable for certain treatment and services will change from “reasonably necessary” to “reasonable and necessary”. The change applies to medical and related treatment, hospital treatment, ambulance services and workplace rehabilitation services.

The reforms will apply to new claims for treatment or services expenses made on or after the 1^st of October 2026. Existing treatment or service expenses made before this date may continue to be assessed under the previous threshold in certain circumstances.

What Does “Reasonable and Necessary” Mean?

These new determining factors place greater emphasis on the purpose, clinical justification and value of a treatment or service. Under the new requirements, insurers will consider whether a treatment or service:

• Primarily treats the injury that is the subject of the workers compensation claim.
• Is clinically justified for the treatment of that injury.
• Is cost effective and represents value for money.

For rehabilitation providers, this means being able to clearly articulate why a particular service or intervention is required and how it relates to the worker’s recovery and return to work. For example, where an assessment or rehabilitation intervention is recommended, it should have a clear purpose and address an identified barrier to recovery or return to work.

This does not mean that rehabilitation services need to be fundamentally different from those currently provided. Rather, it highlights the importance of having a clear rationale behind each service and being able to demonstrate how it contributes to the worker’s recovery and return to work.

What Does this Mean for Employees?

For injured workers, the reforms reinforce the importance of treatment and rehabilitation being directly relevant to their injury and recovery. Workers will continue to have access to appropriate treatment and rehabilitation where it meets the new requirements. However, certain services will no longer be payable under the workers compensation scheme, including some alternative health therapies, wellness services and general health, fitness, social or recreational activities unless prescribed by a medical practitioner.

Early intervention and access to appropriate support will remain important. SIRA has specifically encouraged the use of workplace rehabilitation as early as possible, including during the liability determination period for relevant psychological injury claims.

What Does this Mean for Employers?

For employers, the reforms highlight the importance of effective injury management and return-to-work processes. Where treatment or rehabilitation services are recommended, there may be greater focus on whether the service is appropriate, clinically justified and providing value for money. Employers should continue to work collaboratively with workers, insurers, treating practitioners and rehabilitation providers to identify barriers to recovery, establish suitable duties and support a safe and sustainable return to work.

It is also important to distinguish these changes from the reform that commenced on 1 July 2026, which prevents employers or their representatives from attending a worker’s medical treatment or examination unless requested by the worker. This does not prevent participation in case conferences, which can continue to focus on recovery-at-work planning, barriers to return to work and strategies to overcome them.

What Does this Mean for Workplace Rehabilitation Services?

Workplace rehabilitation services sit within the broader framework covered by the new reasonable and necessary threshold. As a result, rehabilitation providers can expect greater scrutiny around the services they provide, as well as other treatments and assessments they may recommend, such as Activities of Daily Living (ADL) assessments.

A useful way to approach each intervention is to ask four key questions:

• What return-to-work barrier are we addressing?
• Why is this intervention needed?
• What measurable outcome are we expecting?
• Is the intervention continuing to add value?

Taking this approach can help ensure rehabilitation remains purposeful and outcome focused. It also encourages providers to consider whether the service being recommended is the most appropriate option for the worker and whether the expected benefit justifies the intervention and associated cost.

Preparing For The Changes

At this stage, there is no material change to how NSW claims are being serviced. However, the upcoming reforms provide an opportunity for employers and rehabilitation providers to build awareness and consider how current injury management practices demonstrate the purpose and value of treatment and rehabilitation services.

SIRA has indicated that further guidelines and supporting material relating specifically to the “reasonable and necessary” requirements are expected around October 2026, meaning some practical implementation details are still developing. In the meantime, maintaining a focus on early intervention, appropriate support and effective return-to-work outcomes will remain central to good injury management.

While the practical application of the reforms will continue to develop, providers can use this period to strengthen their strategic approach, ensure interventions are clearly linked to return-to-work outcomes and remain focused on delivering meaningful value for injured workers and the workers compensation system.