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31.10.4 Calculation of NWE for Reservists
How is NWE calculated for a reservist who has earnings from other employment?
In accordance with Subsection 8(3), NWE for Reservists in this category will be an amount equal to the sum of Reserve earnings and earnings from other employment. For example, a member with Army Reserve earnings before the injury of $80 per week who also worked with Coles earning $320 per week will have an NWE figure of $400 per week.
How is NWE calculated for a reservist who does not have earnings from any other employment?
It would not be unusual for an individual to be employed solely in the Reserves and to not have earnings from any other form of civilian employment before an injury.
In such cases, it is necessary to determine what the employee could fairly and reasonably have expected to earn before the injury in suitable employment. In other words, the delegate's task in such cases is to place a dollar value on the employee's earning capacity before the injury.
Despite the fact that the individual may not have been actively seeking other employment prior to the injury, it would not be equitable to base his/her NWE solely on Reserve employment. This is a view reflected in Subsection 8(8) which enables delegates to determine an individual's NWE to be 'an amount per week that the employee would have been able to earn at the date of the injury......in suitable paid employment.'
What are the options for calculating NWE for reservists with no other form of employment or earnings?
Option 1 — Deem the individual's NWE to be equal to an amount he/she would have been able to earn in suitable employment (see definition in Section 4) having regard to such matters including age, experience, training, skills, qualification, etc., or
Option 2 — Using the 'deeming' power provided by Section 8 and determine the individual's NWE to be an amount equal to '7 x the daily reserve rate of pay'.
5.1Note: NWE calculated, and compensation paid, under the above options is not based on the individual's actual part-time Reserve earnings but deemed earnings from a notional working capacity in Reserve employment plus other suitable 'civilian' employment. As such, only the proportion of compensation payable representing lost Reserve earnings is exempt from tax.
The remaining compensation payable (i.e. the portion of compensation representing lost earnings from other employment) is considered income assessable for income tax purposes.
6.What is DVA's' preferred option in these cases?
6.1 — In the majority of cases, Option 2 is, as a matter of policy and in the interest of national consistency, preferred and the recommended option. This is particularly so where it is difficult to identify 'suitable employment' due to the individual's lack of genuine skills, qualifications, training, etc.
6.2 — In some cases, it will be possible to clearly satisfy the concept of 'suitable employment' by virtue of an individuals work history where, for example, the person has attained trade qualifications as a butcher or carpenter, etc.
6.3 — Whilst Option 2 is recommended, this policy recognises the need for flexibility to determine, where appropriate, a person's NWE in accordance with Option 1 to reflect such qualification and suitable employment. However, in the absence of clear evidence to support an application of Option 1 in individual cases, delegates should adhere to the recommended Option 2 outlined above.