The SA Government will lift the “seriously injured” threshold for workers’ compensation as part of a compromise on reforms required to prevent the state scheme falling into a financial black hole due to a landmark Supreme Court decision.

An initial bill was withdrawn last week after groups including unions and lawyers said it would slash entitlements for some injured workers and lead to increased litigation, with a new version then tabled.

Premier Peter Malinauskas says agreement with businesses and worker representatives has been reached on reforms that will increase the whole person impairment threshold to 35% from 30% and allow other cost savings.

“This is a sensible compromise which ensures injured workers will get the protection they need, while also ensuring businesses are not hit with significant increases in their return-to-work premiums,” he said.

The SA court ruling, known as the Summerfield decision, made it more likely several injuries could be combined to meet the existing 30% whole person impairment threshold, increasing potential lump sum payments.

Attorney-General Kyam Maher told Parliament, when speaking on the withdrawn bill, that the SA scheme was forecast to support around 105 seriously injured workers next financial year, but the Summerfield decision doubled that to around 200 each year, each costing an average $1.3 million.

As a result, the scheme would be no longer fully funded with an 89% ratio of assets to liabilities as of December 2021 and a $1 billion funding black hole due to insufficient premiums being collected to cover past claims affected by the decision, Mr Maher said.

Without legislative change, it was projected the scheme’s average premium rate would have to increase from 1.7% to 2.2% or higher, leaving SA with the highest average premium rate of any mainland state on an ongoing basis, he said.

The government says the new bill will still ensure the scheme is sustainable and premiums are kept below the legislated maximum target of 2%.

ReturnToWorkSA last year unsuccessfully applied to the High Court for leave to appeal the Summerfield decision.

The Australian Lawyers Alliance (ALA) welcomed the withdrawal of the first bill, while calling for a careful review of its replacement.

“These proposed amendments are major changes,” State President Sarah Vinall said. “We need to remember that these decisions impact the long-term medical and financial situation of people who have suffered serious injury doing their job.”

The ALA says it’s critical the legislation is clear and unambiguous to prevent expensive litigation and further uncertainty, and has also raised concerns about retrospective impacts.