Workers compensation in NSW
What is workers compensation in NSW?
The NSW Workers Compensation Scheme is a compulsory requirement for all employers in New South Wales and provides financial help and medical care to workers who get injured or sick because of their job. The scheme pays benefits to the affected employee, regardless of who was at fault, and is mandatory for all employers in the state, unless they fall into the rare category of exemption.
In simple terms, workers compensation helps employees who have suffered a work injury by covering medical treatments, loss of earnings and rehabilitation to help them recover and return to work. If the injury is severe, it can also include a lump-sum payment for permanent impairment.
The scheme was previously known as WorkCover in NSW until 2015, when it was dissolved and replaced with three agencies: icare, SafeWork NSW and SIRA.1
What is covered by workers compensation in NSW?
Workers’ compensation in NSW can cover injury or illness caused or contributed to by your work, including physical injuries, occupational diseases or psychological injuries.
Physical injuries are identifiable bodily injuries which are often caused by a specific incident, event or series of activities, which result in immediate or gradual damage to the body. Examples include:
- brain injury
- spinal cord injury
- amputations
- permanent blindness
- burns and electrocution.
Unlike physical injuries, occupational diseases are not caused by a single event but develop gradually over a period of time. These conditions are typically linked to environmental factors in the workplace, such as repeated exposure to hazardous chemical. Examples include:
- asbestos-related illnesses (like mesothelioma)
- lung diseases, such as silicosis from dust exposure
- skin conditions, like dermatitis from chemicals.
Psychological injuries are clinically recognised mental health issues that are caused or significantly contributed to by work-related events, rather than personal circumstances alone. It could be caused by a single distressing issue or event, or an ongoing workplace issue (known as a chronic stressor) affecting health and safety. Examples include:
- stress, anxiety, and depression
- post-traumatic stress disorder (PTSD)
- workplace bullying or harassment claims affecting mental health.
Who is responsible for workers compensation in NSW?
The State Insurance Regulatory Authority (SIRA) is the NSW government agency that oversees and regulates the workers compensation scheme in the state. There are three insurance groups that deal with workers compensation in New South Wales: icare NSW, self-insurers and specialised insurers.
- icare NSW: icare is a NSW government organisation dedicated to supporting people with workplace injuries under the NSW Workers Compensation Scheme.It acts for the nominal insurer and engages insurance service providers such as Employers Mutual NSW Limited (EML), Allianz, DXC Technology, GIO, Gallagher Bassett and QBE to manage workers compensation claims on its behalf.
- Self-insurers: Self-insurers are employers that are approved by the State Insurance Regulatory Authority (SIRA) to manage and administer their own workers compensation claims.
- Specialised insurers: Specialised insurers are licensed by SIRA to manage workers compensation claims and provide workers compensation insurance cover to employers in a specific industry.
How does workers compensation work in NSW?
Workers compensation in NSW works by providing no-fault insurance to employees who become injured or ill due to work, with the insurer approving benefits such as income support, medical treatment and rehabilitation. The system is designed to support recovery and a return to work, rather than a ‘blame’ scenario where the employee must prove fault against the employer.
All employers in NSW are required to have workers compensation insurance by law, as outlined in the Workers Compensation Act 1987.2 Significant penalties can apply if an employer breaches this law, including heavy financial or criminal charges, and even jail time.
While it’s compulsory for all employers to have a valid workers compensation insurance policy, if they don’t an injured worker can still make a claim through the state’s uninsured liability scheme (USL). The USL is managed by icare in NSW, which steps in to ensure the employee receives medical and financial support after injury.
How to claim workers compensation NSW
To claim workers compensation in NSW, you must first report the injury to your employer, get a medical certificate and then lodge a claim with the insurer.
A workplace injury or illness could range from something minor like a sprained wrist, to something more serious like an occupational disease (think hearing loss, respiratory diseases, strain injuries). You should also see a doctor to assess the damage and get a certificate of capacity for the claim.
While employees must notify their employer of any work-related injury or illness, it is the responsibility of the employer to notify their insurer (or an icare NSW agent). In New South Wales, the employer legally must report the injury to their insurer within 48 hours of becoming aware of it.3 Your employer should also provide you with the company’s insurance details, and their insurer should make contact with you within 3 business days.
If your claim is approved, you will start receiving compensation benefits. This could take the form of weekly compensation to replace lost income, reimbursements for medical bills and aid with rehabilitation.
How much are workers compensation payouts in NSW?
As of April 2026, the maximum weekly workers compensation payment in NSW is $2,662.10 but the exact payout amount will depend on your individual issue and circumstances. Weekly workers compensation payments are capped at a maximum 95 per cent of pre-injury average weekly earnings but vary depending on a range of factors like the severity of the injury, your wage before the injury, how long you’re expected to be off work and whether the injury will lead to permanent impairment.
Depending on the type of injury, you may also receive support for medical and rehabilitation expenses, such as hospital stays, doctor visits and physiotherapy.
Your compensation could be in weekly payments (where the first 13 weeks of payments are typically 95% of your income and reduced thereafter) or in one lump sum payment, which could apply in the case of permanent impairment.4
Are workers compensation payouts taxable in NSW?
Weekly workers compensation payments in NSW are taxable but most lump sum workers compensation payouts are tax-free.5 Weekly workers compensation payments are meant to replace your usual wage or salary, and this means they are also subject to the exact same tax rules as wages or salaries.
If you receive a lump-sum payment for a permanent injury, it will likely be tax-free, depending on the details of the settlement.
Whether or not your payout is taxable will depend on the type of payment you are receiving. If you’re unsure, it’s always a good idea to check with the ATO or a tax professional to make sure you’re getting the right information for your specific situation.
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1 icare NSW. The NSW workers compensation system. Accessed May 2026.
2 NSW Government. NSW legislation, workers compensation act 1987. Accessed May 2026
3 NSW Government. Workplace Injury Management and Workers Compensation Act 1998 No. 86. Accessed May 2026.
4 icare NSW. Weekly payments for workers insurance. Accessed May 2026.
5 Australian Taxation Office. Personal injury compensation structured settlements. Accessed May 2026.