An empty desk can speak volumes. Another team member off work due to stress. Another manager, scrambling to redistribute work. Another psychological injury claim that'll take months to resolve and cost more than three times that of a physical injury claim.
Across Australia, this scene is playing out with alarming frequency. Psychological injury claims now represent 12% of all serious workers' compensation claims, though, in some states, they make up a massive 38% of costs. While physical workplace injuries have crept up by only 16% over the past decade, psychological injury claims have surged by 161%.
Because of this, the way Australia is tackling workplace mental health is changing. 2025 marks a watershed moment for compensation claims for psychological injuries. This article explores exactly what these changes mean and how they will affect you.
The Silent Surge Behind the Numbers
The growth in psychological injury claims represents tens of thousands of Australian workers whose mental health has been affected by their work environment. In Queensland and throughout Australia, the median time lost from work for mental health claims is almost five times longer than for other injuries and diseases.
But here’s where things get complicated. Are we seeing more psychological injuries, or are we simply getting better at recognising and reporting them?
WorkCover Queensland has explicitly noted that ‘increased reporting doesn't mean new injuries are being created; it means we're getting smarter about identifying existing issues.’ Think about the tradesperson who's always been anxious but never told anyone, or the teacher who spent years powering through burnout until they couldn't anymore. These injuries didn't suddenly appear in 2025. In truth, they’ve been hidden away due to stigma and ineffective reporting mechanisms.
Higher reporting may also be the result of real increased stress. After all, the post-pandemic workplace is a different beast for many. While working from home suits some, others see it as a key stressor. Organisations, big and small, have been dramatically restructured, leaving some fearing redundancy. And if you work in Customer Services, aggression has intensified over the last several years.
The financial impact is staggering. In NSW alone, the average cost per psychological injury claim has nearly doubled from $146,000 in 2020 to $288,000 in 2025. Only 50% of workers with psychological injuries return to work within a year, compared to 95% for physical injuries. This is concerning on two fronts: (1) the seeming rise in workplace mental health issues, affecting workers and families long-term and (2) the huge burden on the compensation system.
Defining the Invisible: What Actually Constitutes a Psychosocial Hazard?
When most people think of workplace hazards, they picture obvious dangers like unguarded machinery, slippery floors, or chemical spills. Psychosocial hazards are less visible. They come from the way work is designed and managed, and from how people interact at work. For example, constant unrealistic deadlines, unclear expectations, or ongoing conflicts can lead to real psychological or even physical harm.
Australian work health and safety legislation, including Queensland's Work Health and Safety Act 2011, now recognises psychosocial hazards as legitimate workplace risks requiring the same approach as physical dangers.
Real-world examples:
- A nurse working consecutive 12-hour shifts with inadequate breaks, making life-or-death decisions while exhausted
- A retail worker facing aggressive customers every day without the right support
- A teacher managing classes of 30+ students with limited resources and mountains of paperwork
- A warehouse supervisor responsible for meeting impossible productivity targets with understaffed teams
These scenarios involve several recognised psychosocial hazards:
- High job demands that exceed reasonable expectations given the available time and resources.
- Low job control, where workers have little say in how they do their work or prioritise tasks
- Poor workplace relationships, ranging from inadequate supervisor support to outright bullying
- Role ambiguity, where job expectations are unclear or performance standards change arbitrarily
Psychosocial hazards also include physical factors that impact psychologically: the open-plan office with constant noise disrupting concentration, the isolated regional posting without adequate support, and the poorly lit workspace that increases stress are all examples.
Also read: The Invisible Injury: Why Mental Health Is Now the Biggest Safety Risk in Australian Workplaces
How Is the Law Evolving?
If you're looking for a single dramatic legislative overhaul, you won't find it quite that neatly packaged. What's happening is more nuanced. Let’s take a look at some recent changes.
Queensland has strengthened its psychosocial hazard framework through amendments to workplace health and safety regulations. From April 1st, 2023, Employers must conduct annual psychosocial risk assessments and demonstrate clear steps toward risk prevention. Safe Work Queensland has increased audits and compliance visits specifically focused on psychosocial hazards, workplace culture, and organisational stressors.
Presumptive laws for high-risk industries have also been introduced, including healthcare, emergency services, and education, streamlining claims for mental health issues in these sectors.
Meanwhile, other states are taking divergent approaches. NSW's Workers Compensation Legislation Amendment Bill 2025 means that, for psychological injuries, the minimum threshold to assess how much an injury permanently affects someone's ability to function (Whole Person Impairment) will increase from 15% to 30% by July 2026. This means a worker must be far more seriously affected before they can access certain entitlements. Physical injuries will continue to use the 15% threshold.
The financial drivers are impossible to ignore for these changes. NSW's iCare deficit could reach $6 billion without reforms, and the scheme is covering only 85 cents per dollar of future liabilities.
What This Means for You
If You're an Employee
You have the right to a psychologically safe workplace. This is a legal requirement under work health and safety legislation.
You can report psychosocial hazards without fear of retaliation. If you're being given excessive amounts of work, receiving inadequate support, being bullied, or facing other hazards affecting your mental health, document incidents with dates, times, and specific circumstances, noting the impact on your well-being.
If you've lodged or are considering a psychological injury claim, understand that in Queensland, insurers must offer early psychological support services while your claim is being assessed. You don't have to wait for your claim to be approved to get these.
If You're a Manager or Employer
In Queensland, your duty of care now explicitly includes psychosocial safety. This requires identifying hazards, assessing risks, implementing controls, and documenting your actions, regardless of whether you are a large firm or a small business.
Start with workload audits. Are your team's responsibilities realistic, given available time and resources? Have you provided clear role expectations and adequate support systems? When did you last check whether your managers know how to recognise signs of psychological distress?
Think ‘reasonable precautions,’ not perfection. You're not required to eliminate all workplace stress; you are required, though, to identify foreseeable psychosocial hazards and take reasonable steps to manage these.
If You're a Mental Health Advocate
Queensland's reforms highlight that psychological injury is a legitimate workplace hazard deserving regulatory oversight. Presumptive laws for healthcare, emergency services, and education workers acknowledge that certain roles carry inherently higher psychological risk. In this way, there has been progress.
However, gaps remain. A recent NSW parliamentary inquiry described some current reforms as ‘discriminatory, perpetuating stigma related to psychological illness by treating psychological injuries as illegitimate’. When all is said and done, if psychological injuries face higher compensation thresholds than physical ones, it sends a clear message that they are taken less seriously.
The Compensation Reality
Australian workers' compensation operates on a no-fault basis. You don't need to prove employer negligence, only that your injury is work-related. But for psychological injuries, establishing that causal connection can be complex.
You'll need a formal diagnosis from a qualified mental health professional, typically a psychiatrist or psychologist. The assessment must establish that you not only have a recognised psychological condition, but that work was a significant contributing factor, not merely coincidental timing.
Supporting documentation matters:
- Workplace records that document conditions, incidents, or changes at work
- Incident reports related to specific events or ongoing issues
- Email communications that show expectations, pressures, or interpersonal problems
- Performance reviews that help establish context around workload
- Witness statements from colleagues or supervisors
- Medical records showing when symptoms began and how they have progressed over time
Compensation entitlements include weekly payments replacing lost income, coverage of reasonable medical treatment, and lump-sum payments for permanent impairment above specified thresholds. The goal is to support recovery and return-to-work where possible.
Compensation alone is not enough. Recovery depends on proper treatment, supportive workplaces, social support, and time. Adversarial claims often undermine recovery, especially when workers face claim disputes or denials.
Parliamentary inquiries have found that current systems frequently fail to support early, graded return-to-work, despite clear evidence that it aids recovery.
Where To From Here
Discussions around workplace mental health and psychological injury compensation are far from being done and dusted. What we're witnessing is a constant development, an evolution.
Some trends are clear. Legislative updates in Victoria, Tasmania, and the ACT signal a broader policy shift toward greater emphasis on mental health and occupational health and safety. Workplace mental health is no longer something on the fringes. And, as years go by, it’s becoming a core part of the way many businesses operate.
Concerns over financial sustainability remain, though. As psychological injury claims continue rising and associated costs escalate, pressure builds for more restrictions, like those involving NSW, we mentioned above. Yet evidence suggests that prevention and early intervention are far more cost-effective than managing long-term claims. Will governments and employers invest upfront to lessen the burden further down the line? Only time will tell.
Workplace culture is shifting with each new generation. Younger workers expect psychological safety to be taken seriously. They are more open about mental health and far less willing to tolerate toxic dynamics that older generations put up with. This cultural shift, even more than legislation, may be what drives the biggest long-term change.
Moving Forward
Australia's approach to workplace mental health and psychological injury compensation is at a crossroads. Recent reforms show progress, with better hazard management, presumptive laws, and stronger oversight for psychological workplace injuries.
On the other hand, other states are moving toward more restrictive compensation eligibility even as they acknowledge rising psychological injury rates. Systems that appear to support return to work but make recovery harder.
For employees, the key takeaway is knowing your rights and accessing support early. For managers and employers, it’s about recognising that managing psychosocial hazards isn’t red tape, but sensible risk management. For mental health advocates, it's recognising progress while maintaining pressure for genuine change.
The hazards we can't see are no less real than those we can. And increasingly, Australian law should reflect that reality. Psychological safety is workplace safety, and that recognition, however imperfect, represents a step in the right direction.
