Loss of Earnings Calculations for Self Employed Persons | Compensation and Support Reference Library, Commission Guidelines, CM7030 Application of the Loss of Earnings Allowance Provisions, Eligibility for the Loss of Earnings Allowance

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Loss of Earnings Calculations for Self Employed Persons

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When calculating earnings for self employed persons, assessors should take into account business income over a timeframe prior to and during the temporary incapacity period. For example, a new business may have significant start-up costs that result in an operating loss. In these circumstances, the assessor will need to consider the overall state of business maturity. This business is likely to be generating income, just not enough to make the business profitable in the short term.

If the veteran or member suffers a temporary incapacity from the treatment of his/her service related condition/s and the business has a drop in income, then the veteran or member is still eligible for the loss of earnings allowance.

In these cases, assessors should consider the earnings or gross income of a business prior to the period of incapacity compared to the income of the business after the period of incapacity to determine the amount of the loss of earnings. Investigation of the revenue of the business rather than the profit of the business should be undertaken.

In addition, if the veteran or member temporarily employs someone to take over the operation of the business, the business may not suffer a reduction in income but may have an increase in expenses. In addition, the veteran or member may no longer be able to draw a wage from the business. In this case, the person has suffered a loss of earnings.

In some circumstances, a self employed person may be able to demonstrate a loss of earnings but determining the actual amount of that loss could be problematic. It may be more beneficial to compare the loss to a wage or salary earner in the same field. Such comparisons would only be required if losses are less than the Special Rate of disability pension. The LOE Allowance for losses equal to or greater than the Special Rate of disability pension are capped at the maximum of the Special Rate of disability pension.