One of the enduring clinical issues in the assessment of plaintiffs in personal injury and workers' compensation claims, as well as applicants for social security and disablement benefits, is that of the evaluation of impairment and work incapacity. Many writers on this topic confuse the concepts of impairment and disability, and similar confusion is reflected in a number of the rating methods that purport to evaluate impairment but in reality assess disability. In Australia there are 20 distinct statutory schemes for workers' compensation, motor accident compensation, and social security and other benefits, which utilise a variety of methods for the rating of psychiatric impairment. Recent legislative changes designed to restrict access to personal injury compensation at common law, which in two Australian State jurisdictions require the use of impairment rating scales, also specify the rating methods to be used in the assessment of psychiatric impairment. This article discusses the concepts of impairment and disability as defined by the World Health Organisation, and reviews the various methods for the rating of psychiatric impairment that are specified by statute in the federal and State jurisdictions in Australia.