Workplace News

ATO workers compensation ruling

On 17 December 2025, the ATO published a class ruling relating to the settlement of a workers compensation claim in the WA workers compensation scheme (Workers Compensation and Injury Management Act 2023 (The Act)).

A class ruling is a public ruling made by the ATO to explain how a relevant provision of the tax law will be applied (how it will treat tax returns) and is designed to give broad guidance and avoid the need for a whole series of private rulings.

In short, income compensation commuted to a lump sum in a settlement agreement will be taxable as ‘ordinary income’. That might be where the amount awarded is only for lost income, or where it forms part of the total compensation. The lump sum part of the settlement that is for lost income must be included in a worker’s tax return as income in the year it was received.

The ruling applies to lump sum amounts for compensation payments to workers from 1 July 2024.

Workers compensation

Workers compensation is a form of insurance payment to employees who are inured at work or become sick due to their work for:

wages while they are not able to work
medical expenses and rehabilitation.

The class ruling applies to that portion of the payment that relates to income. Payments for things like medical expenses and workplace rehabilitation are not included – they are not ordinary income.

Implications

There are a number of expected implications of the new ruling including the potential for significant delays and increased costs:

The WorkCover WA report indicates a sharp quarter on quarter claims cost increase since the implementation of The Act
some insurers and plaintiff law firms have suspended settlements while determining next best steps/responsibilities
previous tax savings on settlements will no longer be realised which will see an increase in settlement costs for claims.

Jackson McDonald Lawyers posted a LinkedIn article after the ruling identifying eight key implications including the likelihood of workers negotiating settlement seeking a higher amount for income compensation; higher payouts and more regulatory review likely leading to higher premiums; and other various requests from workers seeking to structure and time payments in order to minimise the tax impacts and/or liability. They advise ‘Insurers should be cautious about agreeing to a division of the settlement sum requested for this sole purpose (of limited potential tax liability).’

Further information:

WorkCover WA impairment guidelines

WorkCover WA has, on 16 December 2025, invited comment on its Guidelines for the Evaluation of Permanent Impairment.

The Guidelines are used by approved permanent impairment assessors (APIA) in assessing a worker’s degree of permanent impairment resulting from an injury. They are based on template National Guidelines which were revised in January 2024.

The technical review of the WorkCover WA Guidelines will address two main matters:

The changes to the National Guidelines which weren’t considered for adoption at the time because of timing issues with the implementation of the Workers Compensation and Injury Management Act 2023 (WA).
A small number of issues raised by assessors or other stakeholders in the meantime.

The update is ’limited to feedback on the template National Guideline changes and the WA specific issues identified by WorkCover WA as well as any technical changes identified by scheme participants to clarify existing provisions or chapters.’

Next steps

Written submissions close on 27 February 2026.

WorkCover WA will then review the submissions, obtain any further expert medical advice, and seek WorkCover WA Board approval to publish a second edition of its Guidelines.

If approval is given, it is expected the updated WorkCover WA Guidelines will be published in March/April for implementation on 2 July 2026.

APIA’s will be required to participate in a WorkCover WA information session.

Further information:

National Employment Standards

The House of Representatives Standing Committee on Employment, Workplace Relations, Skills and Training is inquiring into the operation and adequacy of the National Employment Standards (NES).

The NES detail the minimum conditions for all workers and they apply to employers and employees in the national workplace system.

The question being asked is whether they are still meeting the needs of workers, employers and the broader economy, particularly given the fast-changing world of work.

The standards cover matters such as different kinds of leave (parental, annual, personal, long service, community service); maximum hours of work, public holidays; the right to request flexible work arrangements; superannuation contributions and notice of termination and redundancy pay.

The inquiry will have particular reference to:

the objective and purpose of the NES as part of the safety net framework, as well as individual NES entitlements.
the extent to which the NES is fit for purpose, having regard to the changing nature of work.
the role of the NES in promoting the object of the Fair Work Act set out in Section 3.
the adequacy, relevance and coherence of existing NES entitlements.
the effectiveness and application of the NES, including opportunities for technical improvements.
the interaction between the NES and other workplace instruments, including modern awards, enterprise agreements, and individual flexibility arrangements.
the types of workers covered by the NES and consideration of differences in experience of the NES, including experiences of women, workers over 55, young workers, First Nations workers and workers with disability.
whether there are any gaps in data information about any of these matters and what action is required to address these.
any related matters.

It will not focus on flexible working arrangements, casual employment, parental leave, or family and domestic violence leave, as these matters have either been recently reviewed or are scheduled for separate reviews.

Written submissions with suggested recommendations close on Friday 27 February.

Further information:

NSW Workers Compensation Scheme – bill passes

In May 2025, the NSW Government released its Workers Compensation Legislation Amendment Bill 2025 which proposed sweeping changes to the State’s workers compensation scheme. This original bill, together with another called the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 (proposed on 6 August), were referred to a Parliamentary Committee that conducted multiple public hearings and gathered extensive stakeholder input.

On 3 November 2025, the Parliamentary Committee published a 162-page report containing 14 recommendations.

On 13 November 2025, an amended version of the original bill was returned to the Legislative Council for debate and within a matter of days it was passed by both houses of Parliament.

The new legislation introduces several significant changes including:

Updated definitions of psychological injuries, introducing objective tests for bullying, excessive work demands, racial harassment, and sexual harassment.
Disputed claims involving ‘relevant conduct’ must now be referred to the Industrial Relations Commission for determination.
Clearer definitions around ‘reasonable management action’, with corresponding amendments to Section 11A.
There is to be only one ‘principal assessment’ of Whole Person Impairment (WPI) made by an approved medical assessor, rather than workers and insurers obtaining their own individual assessments.
A worker can obtain another principal assessment only if their level of WPI is likely to have increased by 10% WPI or more.
Medical and treatment expense test updated from ‘reasonably necessary’ to a higher threshold of ‘reasonable and necessary’.
Section 59A reduces the period in which medical expenses are paid for a primary psychological injury.
Section 39A has been amended to limit weekly payments for psychological injuries to 130 weeks (2.5 years), unless the worker is assessed at 21% WPI or higher.
Negotiation of lump sum death benefits allowed where there is a legitimate liability dispute.

Note: The proposed amendments to increase the threshold for permanent impairment and work injury damages for psychological injuries from 15% WPI to 31% WPI were not passed. This means the threshold remains at 15% WPI.

Next steps

With the legislation passed by Parliament, the process of implementing the reforms will commence. It is expected to involve staged commencement dates, new regulations, and potentially further legislative updates.

New regulations and guidelines will need to be developed by SIRA to give effect to the reforms.

Further information:

WorkSafe Victora – new mental health laws commence

Victoria’s new workplace mental health laws commenced from 1 December 2025.

The new regulations are designed to strengthen workplace safety by recognising psychosocial hazards as critical physical hazards due to their potential to cause psychological and physical harm to workers. The regulations require employers to identify, manage, and review risks associated with psychosocial hazards, which include issues like bullying, harassment, and exposure to traumatic events.

Further information:

Western Australian WHS laws – review underway

WA’s Work Health and Safety Act 2020 must undergo a review process every five years. The purpose of the review is to gather feedback to identify areas of improvement and ensure the WHS Act is operating as intended.

The new laws came into effect in 2022 and aim to protect the health, safety and welfare of all workers at work.

Submissions closed on 28 November 2025 and will inform the statutory review.

WorkSafe WA – new standard

The workplace exposure standard (WES) for aluminium welding fumes in Western Australia has been lowered from 5 mg/m³ to 1 mg/m³, effective immediately.

Persons conducting a business or undertaking (PCBUs) must take all reasonably practicable steps to reduce exposure risks including reviewing current controls, conducting exposure assessments and implementing higher-level controls, such as substitution, isolation, and engineering controls.

This Statement of Regulatory Intent sets out WorkSafe’s approach for enforcing the new aluminium welding fumes exposure standard under the Work Health and Safety (General) Regulations 2022 and Work Health and Safety (Mines) Regulations 2022.

WorkSafe will take an educational approach to this issue over the first 12 months.

Further information: