NSW reforms must deliver relief without drowning SMEs in red tape, industry body warns
Small businesses across NSW are facing a double hit from workers compensation reforms that promise cost relief but threaten to bury operators under layers of new complexity and administrative burden.
The Council of Small Business Organisations Australia (COSBOA) is pushing the NSW Government to ensure that sweeping changes proposed under the Workers Compensation Legislation Amendment Bill 2025 actually work for the small operators who make up the backbone of the state’s economy.
With premium increases of 8% already locked in for the new financial year and the scheme’s deficit ballooning by $1.8 billion last year – equivalent to nearly $5 million bleeding out every day – everyone agrees the system needs urgent attention.
But COSBOA CEO Luke Achterstraat warns that good intentions could backfire if the reforms don’t account for how small businesses actually operate. “The current system is like trying to run a small business while bailing water out of a leaky boat,” Mr Achterstraat said. “Yes, the NSW Government is right to try and plug the holes, but we also need to make sure they’re not redesigning the boat in a way that makes it harder for small businesses to steer.”
The reality check
The reforms emerged following the NSW Upper House Standing Committee on Law and Justice’s May 2025 report on psychological injury entitlements, which highlighted serious concerns about escalating costs and system sustainability.
For small business owners already juggling multiple responsibilities, the proposed changes represent both opportunity and risk. While some measures could provide much-needed cost relief, others threaten to add layers of complexity that many SMEs simply can’t handle. “Small business owners aren’t compensation lawyers. They need tools, not red tape,” Mr Achterstraat said.
What SME supports
COSBOA has outlined strong support for several key elements of the proposed reforms:
Reasonable Management Action Provisions (Section 8D) provide clear boundaries protecting everyday management activities like performance reviews and disciplinary action – giving small business owners confidence to manage their teams without fear of inadvertent compensation claims.
Tribunal Requirements for Psychological Claims (Section 8F) ensure an objective threshold before triggering compensation, helping reduce speculative or vexatious claims that can cripple small operators.
Time Limits on Psychological Injury Claims (Section 39A) offer crucial cost containment measures, while Medical Expense Controls with tightened language could help curb excessive or inappropriate costs that have been driving premiums through the roof.
The missing pieces
However, COSBOA argues the reforms still fall short of addressing the practical realities facing small business operators. On cost versus capacity, Mr Achterstraat delivered a stark warning: “You can’t promise a high performance vehicle and expect it to run on fumes.”
The organization is calling for a phased rollout of new benefits and specific protection for smaller operators, including premium increase caps of 5% for businesses with fewer than 50 staff. Beyond cost control, COSBOA emphasizes that small businesses need practical support to navigate the reformed system effectively.
Key recommendations include establishing a dedicated mental health support program specifically designed for small business needs, creating a specialized small business advice unit, and ensuring clear, accountable contacts for claim management. The group also wants clear definitions, free training programs, and sector-specific templates to help business owners meet new requirements with confidence rather than confusion.
Streamlining over complexity
Perhaps most critically, COSBOA is pushing for streamlined processes and clearer responsibility distribution between insurers and businesses to prevent small operators from drowning in paperwork. “If we want this system to stay afloat, we need to do more than patch it up. We need to build something that small business can actually operate – not just survive in,” Mr Achterstraat said.
With small businesses employing nearly 5 million Australians and contributing significantly to economic growth, getting workers compensation reform right isn’t just about individual operators – it’s about the broader economic ecosystem. The challenge now is ensuring that reforms designed to fix systemic problems don’t create new barriers for the businesses they’re meant to protect.
“Let’s make sure this isn’t another well-intentioned reform that leaves small business bailing water without a lifeboat,” Mr Achterstraat concluded.
The NSW Government is expected to progress the Workers Compensation Legislation Amendment Bill 2025 through parliament in the coming months, with implementation timelines still to be confirmed.
For more information about COSBOA’s position on workers compensation reform, visit www.cosboa.org.au
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
