If you’re receiving weekly payments through NSW workers compensation, a “work capacity decision” is one of the most important pieces of correspondence you can receive because it can reduce or stop your income support. These decisions often arrive just as a worker is trying to return to work and they can feel administrative or final.
They are neither. A work capacity decision can be reviewed and challenged but there is one deadline that matters more than any other and missing it can mean your payments are cut while the dispute drags on. This guide explains what these decisions are, your review rights and the timing that protects your payments.
This is general information, not legal advice about your own claim. Every matter turns on its own evidence, the wording of the decision notice and your circumstances.
What is a work capacity decision?
A work capacity decision is defined in section 43 of the Workers Compensation Act 1987 (NSW). It is a decision by the insurer about your ability to work and earn and, through that, your entitlement to weekly payments. Under section 43, it can be a decision about your current work capacity, what counts as suitable employment for you, how much you are able to earn in suitable employment, your pre injury average weekly earnings (PIAWE) or current weekly earnings, whether, because of your injury, you cannot engage in certain work without substantial risk of further injury, or any other decision that affects your entitlement to weekly payments, including a decision to suspend, reduce or discontinue them.
The practical effect is what matters. A work capacity decision is the mechanism insurers most commonly use to lower or end weekly payments. Many of these decisions begin with the insurer arranging a vocational assessment, which concludes you could do some other type of work, often clerical or administrative, and earn an income, which is then used to reduce your payments.
It’s worth knowing what a work capacity decision is not. It is not a decision to dispute liability for your claim (that’s a different process, a Section 78 liability dispute) and it is not a medical dispute that goes to a medical assessor. Those run on separate tracks.
When can the insurer make one?
The insurer can conduct a work capacity assessment and issue a decision every two years and this can happen at any stage of the claim. In practice, insurers tend to issue them around key pressure points, particularly as a worker approaches the 130 week mark, where ongoing entitlement is re evaluated.
There is an important protection. An insurer generally cannot conduct a work capacity assessment or issue a work capacity decision for a worker with highest needs assessed at 31% WPI or greater, unless that worker requests it. Workers in this category are largely shielded from this process.
The insurer is also required to give you advance notice, generally two weeks, that a review of your capacity is taking place, to tell you that you may need to attend a medico legal examination or that your treating doctor may be contacted and to explain when you can expect the decision and your rights of review.
The deadline that matters most
This is the single most important thing to understand about work capacity decisions and the reason acting quickly is critical.
When the insurer issues a work capacity decision that will reduce or stop your payments, the decision notice states a period of notice before it takes effect. That notice period is your window to act. Once it expires and the decision takes effect, your payments can be cut while any dispute is still being worked through, leaving you without full income support at exactly the wrong time.
This is why a work capacity decision should never be left sitting on the kitchen table. The clock in the notice is the deadline to get advice and start a dispute. Because the timing rules around these decisions are technical and can directly affect whether your payments are interrupted, it’s important to have an approved lawyer assess your specific notice straight away.
Your review options
If you disagree with a work capacity decision, you generally have two main pathways and you don’t have to do them in order. You can go straight to the Commission.
1. Internal review by the insurer (optional)
You can ask the insurer to review its own decision. This is done on a review form and the insurer must consider any further material and respond, generally within 14 days. The review must be carried out by someone other than the person who made the original decision. Two cautions. Insurers rarely overturn their own decisions and an internal review can consume time you may need to start a dispute within the notice period.
2. Apply to the Personal Injury Commission (PIC)
The PIC is the independent tribunal that resolves these disputes and since 2019 work capacity disputes fall within its jurisdiction. You can apply directly. You do not have to do an internal review first. Work capacity disputes are dealt with expeditiously. They are typically listed for an expedited conference, often around 14 days from lodgment.
What actually wins these disputes
Whether a work capacity decision can be overturned usually comes down to the evidence you put up in reply. The key step is to obtain evidence that supports your position and to seek legal advice early about what that evidence needs to show.
These decisions frequently rest on a vocational assessment that assumes you can perform some other kind of work. That assumption can be challenged with the right material. A central piece is making sure your treating doctor (GP or specialist) properly addresses the “suitable employment” options, confirming, with reasons, whether you can realistically perform the suggested duties given both your injury (primary and any consequential conditions) and your age, education, skills and experience. If your doctor considers the suggested work unsuitable, that opinion, clearly explained, is often decisive.
Because knowing what evidence carries weight is itself a matter of strategy, this is an area where early legal advice makes a real difference. An approved lawyer can identify the gaps in the insurer’s decision and help you assemble the medical and other evidence that directly answers it.
What to do if you receive a work capacity decision
A clear sequence protects your position.
Read the notice immediately and find the date the decision takes effect. That is your deadline. Keep the notice and every attachment, including any vocational assessment. Get the decision in front of an IRO approved workers compensation lawyer straight away, well before the notice period expires, so a dispute can be started in time. Ask your treating doctor to respond specifically to the suitable employment options, with reasons. Don’t rely on phone calls with the case manager. Your formal review rights and the notice deadline are what protect you.
If you’ve already received notice that you must attend a vocational assessment, that is often the early warning sign that a work capacity decision is coming. Getting advice at that stage, before the decision is made, can put you in a much stronger position.
Frequently asked questions
Can the insurer just stop my payments?
Not without process. A work capacity decision must be issued with a notice period before it takes effect and you have the right to dispute it. How a dispute affects your payments in the meantime depends on the specifics and timing, which is why it’s important to get advice as soon as the notice arrives.
Does asking for an internal review protect my payments?
An internal review is optional and insurers rarely overturn their own decisions. It can also use up time you may need to start a dispute within the notice period, so it’s worth getting advice before choosing this route.
How long do I have to challenge it?
The critical window is the notice period stated in the decision itself. Because that period can be short and the timing rules are technical, get advice the moment you receive the decision.
Do I have to do an internal review before going to the Commission?
No. You can apply directly to the PIC and many workers do.
Can I get a work capacity decision if I’m seriously injured?
Generally not if you’re assessed at 31% WPI or more (a worker with highest needs). The insurer cannot run this process unless you request it.
Will it cost me money to challenge it?
For most eligible NSW workers, the cost is covered through IRO/ILARS funding, which pays an approved lawyer’s fees and the cost of supporting medical evidence.
Where Stephen Young Lawyers can help
A work capacity decision can quietly undo months of recovery by cutting the income you depend on but it is a reviewable decision and the notice period gives you a window to act. The workers who do best act fast, get advice well before the notice period expires and put up properly targeted medical evidence in reply.
As an Accredited Specialist personal injury firm based in Sydney CBD, with a multilingual team, we help injured workers understand exactly what a work capacity decision means and move quickly to protect their entitlements. For eligible workers, legal costs and the cost of medical reports can be covered through IRO/ILARS funding, meaning you can challenge an unfair decision at no cost to you.
or call +61 2 9635 0889.
This article provides general information only and is current as at June 2026. It is not legal advice and should not be relied on as a substitute for advice tailored to your own decision notice, evidence, deadlines, and circumstances. NSW workers compensation law is undergoing significant reform, and some rules are changing. Liability limited by a scheme approved under Professional Standards Legislation.