The NSW government will seek to overhaul workplace compensation laws after saying the mounting cost of psychological injuries to the state's compensation system has pushed it to the brink of collapse.
NSW Treasurer Daniel Mookhey said the government would introduce a bill on Tuesday to reform "the way the NSW workers compensation system deals with psychological injury".
Earlier in May, the treasurer warned that Australia's largest workers compensation scheme was at risk of failing due a surge in psychological payouts, a claim disputed by unions.
The proposed laws would address lack of focus on preventing mental injury, the low rate of recovery and return to work for such injuries, and stop a sharp rise in premiums, Mr Mookhey said.
"We are creating a modern system that will better protect workers from psychological injury and provide better help when they need it," he said in a statement.
"I want to ensure that future generations of workers across NSW have a workers compensation system they can rely on."
Under the proposals, there would be from October a lift to the "whole person impairment" measure for psychological injuries that determined weekly life payments, the government said.
Mookhey previously told a parliamentary inquiry that if reforms were not passed, he would not inject more money into the government's under-pressure fund.
As well as legislative reform, the government said it would inject $344 million in new funding for measures to support mental health in the workplace.
State agency iCare, which acts for the Workers Compensation Nominal Insurer, protects more than 3.6 million workers.
Another fund covers most of the state's 450,000 government workers.
Mookhey has previously claimed credit for exposing troubles inside iCare, which drew media scrutiny in 2021 over workers being underpaid while executives scored huge bonuses.
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