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6.7.2 Serving Part-time Reservists

Normal earnings are the sum of the person's ADF component and civilian component for the week, calculated in accordance with sections 95 - 100.  The components are calculated differently according to whether or not the person is incapacitated for (defence) service or for (civilian) work, but the formula is essentially:

ADF Reserve pay and allowances     +     civilian pay and allowances

The ADF component for a Reservist incapacitated for (Defence) service is calculated in accordance with section 96:

Reserve days     x     Reserve daily rate of pay including any pay related allowances

The delegate must obtain details from Defence (DVA SAM will obtain this information from the member's unit) of the number of days for the week that the Reservist would have been paid as a Reservist, the date any pay-related allowances would have ceased and the number of days the Reservist would have been paid the allowances.

The ADF component for a Reservist not incapacitated for (Defence) service is calculated in accordance with section 97:

Actual Reserve earnings including pay-related allowances for the week

This ensures a person's NE is equal to their AE for the ADF component of NE.

The civilian component for a Reservist who is incapacitated for (civilian) work is calculated in accordance with section 98:

average number of days engaged in civilian work     x     civilian daily earnings

Where the example period is normally the last 2-week period the person was engaged in work ending before the onset date of the incapacity.  If the example period does not fairly represent the person's pay the delegate may determine a different 2-week period or a period of different length.

Civilian daily earnings for those working before the onset of the incapacity are:

civilian daily hours     x     civilian rate of pay including overtime and allowances

Overtime is only included if it was being worked on a regular basis.

If the Reservist was not working before being incapacitated, the civilian component is nil.

The civilian component for a Reservist who is not incapacitated for (civilian) work is the amount the Reservist earns for the week from civilian work, including allowances other than expense allowances.  This ensures a person's NE is equal to their AE for the civilian component of NE.

Actual earnings are calculated in accordance with section 101:

actual Reserve rate of pay including pay-related allowances     +     actual civilian earnings

where:

  • actual ADF pay for a week means the amount of pay that the Reservist earns for the week as a part?time Reservist;
  • actual pay?related allowances for a week means the total amount of compensable pay?related allowances (as defined in subsection 96(3)) that are paid to the Reservist for the week; and
  • actual civilian earnings means the greater of the following amounts:

(a)the weekly amount (if any) that the Reservist is [deemed] able to earn in suitable work as per section 181;

(b)the amount the Reservist earns (including from allowances other than expense allowances) for the week from civilian work that he or she undertakes for the week.

Note:

Delegates should refer to the commentary at 6.3.18 of this chapter about the provisions of section 181 regarding deeming AE.

Note:

Item 10 of Schedule 4 of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 provides that the component of incapacity payments that are derived from normal earnings as a part-time Reservist are exempt from income tax.  Any component of incapacity payments that are derived from normal earnings in civilian work are assessable for income tax purposes.

Note:.

Section 179 provides that if a member or former member's NE is less than the national minimum wage, then that person's NE is the national minimum wage.  Incapacity payments calculated by reference to the national minimum wage are assessable for income tax purposes.

Example 1:

A RAAF Reservist broke her left wrist on a weekend training activity.  She is incapacitated for her Reserve service and civilian work for 3 weeks.

She normally parades with her Reserve squadron every Saturday.  Her NE as a Reservist is $87.58 for 1-day each week.

She also works as a Casual employee with a local supermarket.  She is paid $15.50 per hour.  She has provided a copy of her pay slips for the 2-week (example) period prior to breaking her wrist.  During this 2-week period she worked 9 days for a total of 54 hours (6 hours per day).

Civilian daily earnings are:

civilian daily hours     x     civilian rate of pay including overtime and allowances

6     x     $15.50     =     $93 per day

In a week her average civilian NE is:

average number of days engaged in civilian work     x     civilian daily earnings

4.5     x     $93     =     $418.50

Her total NE is:

ADF Reserve pay and allowances     +     civilian pay and allowances     =

$87.58     +     $418.50     =     $506.08

As $506.08 is less than the national minimum wage of $569.90 (as at 1 July 2010), her default NE is $569.90 per week.

The RAAF Reservist is paid incapacity payments at the rate of $569.90 per week for the 3-week period of her incapacity.  The entire amount is assessable for income tax purposes as NE was not calculated by reference to the member's Reserve earnings.

Note:.

Section 182 prescribes that the civilian component of NE is indexed on 1 July each year in accordance with the wage price index (WPI).

Example 2:

A RAAF Reservist is injured during Reserve employment when she is 16 weeks pregnant.  She is fit for sedentary and office based employment and is therefore able to continue her Reserve parades however is unfit for her civilian work as a contract nurse, for which she earns $650.00 per week.  Her nursing contract ended 2 months later.  She then provides medical certification to say she is fit to return to nursing duties.  She chooses not to work because of pregnancy and for six months after having the baby.  She then intends to rejoin workforce but is informed that she requires surgery to enable this to happen.  After surgery she is referred for and is participating in a rehabilitation program and during this time is offered employment with her Reserve Unit on a full time basis (not CFTS).

The entitlement is Reserve pay  + civilian pay less any actual earnings.

If the person was incapacitated for service then the Reserve component of NE is what the service chief advises that the person would have earned if they were not incapacitated for service.

When working out the civilian component Section 99 (1) defines the example period for an incapacitated Reservist who is incapacitated for work as being the latest  2 weeks during which the Reservist was continuously engaged in civilian work and ending before the onset date for the incapacity.

As there are two distinct periods of incapacity in the above scenario the example period for the initial period of incapacity includes her Reserve earnings and her civilian earnings as a Nurse.  However because the person has not been continuously incapacitated a new example period needs to be established for the period of incapacity following the surgery.  As she was not working during this example period Section 98(4) should apply:

The civilian daily earnings for an incapacitated Reservist who was not engaged in civilian work before the onset date for the incapacity is nil.

Accordingly, for the second period of incapacity  NE will default to the National Minimum Wage (NMW), as the combined civilian and Reserve NE is less than the NMW.