By Joel Trigg
When the Workers Compensation and Injury Management Act 2023 (the Act) came into force on 1 July 2024, it represented the most significant overhaul of Western Australia’s workers compensation framework in decades.
The stated intent was modernisation: a cleaner, more coherent system to better serve injured workers. Less than a year later, however, the Law Society of Western Australia was writing urgent letters to the Minister for Industrial Relations, describing a scheme beset by serious legal uncertainty, administrative dysfunction, and a troubling pattern of unilateral decision-making by the regulator, WorkCover WA.
The problems are not minor implementation hiccups. They go to the heart of whether the Act, as currently operating, is delivering just outcomes for the very people it was designed to protect.
The taxation time bomb
Perhaps the most consequential issue to emerge from the Act’s commencement is one that its drafters appear not to have anticipated: a shift in the Australian Taxation Office’s treatment of workers compensation settlements.
Under the previous legislative framework, settlements of workers compensation entitlements were not treated as taxable income. The ATO had made that position clear. But a change in terminology in the new Act, from “weekly payments” to “income compensation”, appears to have triggered a reassessment. A private ATO tax ruling, followed by Class Ruling CR 2025/88, confirmed that the income compensation component of a settlement is now taxable.
The consequences are serious and wide-ranging. Low-income workers who redeem years of income compensation in a single lump sum are being taxed on the entire amount in one financial year, despite the fact that those payments represent income spread over many years of incapacity.
Workers who resolved their claims after 1 July 2024, many of whom may not have understood the tax implications at the time, now face potential unexpected tax liabilities. Insurers, both private and the Insurance Commission of Western Australia, are confronting increased costs. And workers whose permanent impairment has not yet stabilised may be paying tax on settlement monies that are not for income compensation.
In early 2026, insurers, seeking legal and taxation advice before proceeding, became reluctant to enter settlement agreements at all. The majority of insurers effectively froze their settlement activities during this period, leaving injured workers in limbo, without income and without resolution of their claims.
The taxation issue also exposes a deeper problem. The Act is a state instrument, and the ATO’s position is not something that can be corrected through amendments to state legislation. Workers compensation claimants in Western Australia now find themselves caught between two regulatory systems, with no clear path to relief.
A backlog that should not have happened
The taxation issue was not the only problem confronting the scheme at commencement. The Law Society also raised serious concerns about the timeliness of settlement approval by WorkCover WA itself.
Prior to 1 July 2024, settlement documentation was typically approved within two to three weeks. After the Act commenced, that timeline blew out to many weeks, and in some cases months. This was at least in part due to a high volume of non-compliant applications — a consequence of inadequate preparation and guidance before the new system went live. The removal of section 92(f) deeds as a pathway for settlement added further complexity, leaving practitioners without a previously available tool.
The Minister acknowledged the backlog in her April 2025 response to the Law Society, noting that WorkCover WA had committed significant resources to resolving it and that processing times had returned to normal.
That may be so. But the fact that such a backlog developed so quickly, and that injured workers were left without income for extended periods as a result, raises serious questions about the adequacy of the scheme’s implementation planning.
For a worker who cannot work due to injury, weeks without income is not an administrative inconvenience. It is a financial crisis.
Permanent Impairment Guidelines: Overriding the Courts without consultation
If the taxation and backlog issues represented difficult but arguably unforeseeable consequences of the Act’s commencement, the Law Society’s most recent complaint is of a different and more troubling character.
WorkCover WA has published the second edition of its Guidelines for the Evaluation of Permanent Impairment. The most significant change introduced by these Guidelines is the prohibition on an Approved Permanent Impairment Assessor from taking into account the prospect of future surgery when conducting a Special Assessment.
This directly contradicts a decision of the Supreme Court of Western Australia. In East Metropolitan Health Service v Lee [2022] WASC 54, the Court confirmed that an assessor is entitled to consider the prospect of future surgery when undertaking a Special Evaluation.
That ruling was significant precisely because it protected workers from being disadvantaged by factors outside their control, including delays by insurers in approving surgery, or delays by arbitrators in determining whether proposed surgery is reasonable.
By prohibiting assessors from considering future surgery, the new Guidelines effectively override that judicial protection. A worker whose permanent impairment assessment is conducted before proposed surgery is approved or performed will now receive an assessment that does not account for the increased impairment that surgery may bring. The insurer, by delaying approval of surgery, can directly affect the compensation outcome. That cannot have been the legislature’s intent.
What makes this particularly concerning is not just the substance of the change, but the manner in which it was made. This significant alteration, one with real and adverse consequences for injured workers, was introduced without any prior consultation with the legal profession or other stakeholders. No warning. No discussion paper. No opportunity for affected parties to raise concerns before the Guidelines took effect.
This is not a minor administrative adjustment. It is a unilateral regulatory decision that overrides a considered judicial ruling and materially diminishes the rights of injured workers.
When the election process collapsed: Neville v Choice One
While the taxation and backlog issues were causing disruption in the newly commenced scheme, a separate crisis was unfolding. On 5 September 2024, the WA Court of Appeal handed down its decision in Neville v Choice One Pty Ltd [2024] WASCA 104.
The Neville decision threatened to invalidate hundreds of common law elections and deprive injured workers of their right to pursue damages, not on the merits of their claims, but on a procedural technicality.
The case concerned Donald Neville, who had suffered a lower back and right hip injury at work. His solicitor lodged common law election papers with the Director of WorkCover WA on 28 March 2019, including an Approved Medical Specialist certificate, assessing his permanent whole of person impairment at 18%, and a Form 34 purporting to elect to retain the right to seek common law damages.
The Director recorded the impairment assessment on 29 March 2019, which was one day after the election papers were lodged, and registered the election.
That one-day gap proved fatal. The Court of Appeal held that a valid common law election under section 93L(2)(b) of the 1981 Act required the Director to have already recorded the worker’s permanent impairment assessment before the election was made. Because the Director had not done so at the time Mr Neville’s election papers were lodged, the election was invalid.
Critically, the Court confirmed that subsequent registration did not retroactively cure the defect. The timing of the election was not a formality; it was a statutory prerequisite.
The implications were immediately apparent. WorkCover WA’s e-lodgement system, which it had itself implemented, required practitioners to upload the election form at the same time as submitting the impairment evidence. This simultaneous lodgement process, followed industry-wide, meant that in every such case the election was made before the Director had recorded the impairment assessment.
The decision was therefore understood to potentially invalidate hundreds of elections currently being litigated in the District Court of Western Australia. Workers faced the prospect of having their proceedings struck out, stayed, dismissed, or discontinued regardless of the merits or quantum of their claims.
This was not a problem of workers’ own making. They had followed a process prescribed and administered by WorkCover WA. The system had failed them, and the Court of Appeal’s strict statutory interpretation now threatened to deny them justice entirely.
The Government moved quickly. On 15 October 2024, less than six weeks after the Court of Appeal decision, the Minister for Industrial Relations introduced the Workers Compensation and Injury Management Amendment (Common Law Election Validation) Bill 2024. The legislation retrospectively validated common law elections made under the 1981 Act where the Director had recorded the impairment assessment but not before the purported election was made.
It also preserved current proceedings affected by the decision, enabled new or recommenced proceedings where claims had already been struck out or discontinued since 5 September 2024, and provided a 12-month extension to limitation periods for affected workers whose time had expired or was about to expire.
The Bill passed Parliament and received broad support from the Law Society, the legal community, and across the chamber. It was the right response. But the episode raises uncomfortable questions about how the crisis arose in the first place. WorkCover WA’s own e-lodgement system created the conditions for mass invalidity.
The regulator had, in effect, designed a process that was incompatible with the strict statutory requirements of the legislation it administered. That hundreds of injured workers came within a judicial decision of losing their right to sue, through no fault of their own, and as a direct consequence of following WorkCover WA’s prescribed procedures, is a serious institutional failure, even if one that was ultimately remedied by urgent legislative intervention.
A pattern, not an incident
Taken together, these issues suggest something more than the ordinary friction of a new legislative scheme finding its feet. The taxation issue exposed a failure to anticipate the consequences of changed terminology. The settlement backlog exposed inadequate preparation for a new approval regime.
The Neville crisis revealed that WorkCover WA’s own administrative systems were incompatible with the statutory requirements of the legislation it administered. The permanent impairment guidelines reveal a willingness to make consequential changes to workers’ rights without consultation or transparency.
The Minister declined, in April 2025, to agree that a full review of the Act was necessary, noting that it had only recently commenced operation and that feedback had been generally positive. I am yet to meet any practitioner, insurer, worker or employer who has expressed anything positive about the new Act.
The Law Society through its Personal Injuries and Workers Compensation Committee has requested a meeting with the Minister a number of times, to no avail. The Law Society has written formally and urgently. Members have reached out privately to the Minister. Yet, the Minister has not accepted the invitation to meet.
It is essential that government engage with the legal profession to hear our perspective on this legislation; the intent of which is to ensure this legislation is fit for purpose. Western Australia’s injured workers deserve a compensation system that is fair, functional, and consistently administered.
