NWE is generally based on a 2-week relevant (example) period when the person was continuously employed by the Commonwealth before the date of injury.  Delegates have the discretion to determine a different example period as is considered reasonable under S8, Subsections 8(4) and 8(5) and S9, Subsections 9(2), (3) and (4).

All periods of incapacity, including periods paid while the person is serving, are counted toward the maximum rate weeks (45 weeks).

The following formula is applicable when the person:

• Was injured in PF or CFTS

• Is currently serving

• Current service is in the Permanent Forces or part-time Reserves

The basis for payment remains even after return to work as a part-time Reservist.

where:

• ADF rate of pay means the amount of pay the member would have received for the week as a PF or CFTS member if not incapacitated for service; and

• Allowances for the week means the total compensable allowances that the member would have received for the week if not incapacitated for service – see section 4.6.

The formula for calculating NWE under section 8(1) relies on average weekly hours and pay rates, as Permanent Forces members (or those on CFTS) are not paid by the hour, and their salary does not vary, NWE is instead determined by their ADF salary as a full-time member (either in PF service or CFTS). 

The military pay scales are used to establish the ADF pay (which, where applicable, includes Service Allowance).

The following formula is applicable when the person:

• Was injured in part-time Reserve service

• Is currently serving

• Current service is in the part-time Reserve

Where:

• ADF Reserve pay and allowances means the reserve pay and allowances the member would have received for the week if not incapacitated for work (see section 5.3.1); and

• civilian pay and allowances means the civilian pay and allowances that the member would have received for the week if not incapacitated for work (section 5.3.2).

5.3.1 Calculating ADF Reserve pay and allowances

There are a number of established methods for determining the reserve pay and allowances from Reserve employment under the DRCA depending on whether or not a person is likely to return to Reserve service:

1. Short-term incapacity.
2. Long-term incapacity – based on the person’s current year of service.
3. Long-term incapacity – based on the person’s history of service.

These methods are based on different relevant periods, however the delegate has the discretion (under subsection 8(5)) to use any period that best represents the person’s lost earnings. 

Where the person is incapacitated for a short-term period the person’s ‘ADF Reserve pay and allowances’ is equal to the pay they have actually lost during the period.

5.3.1.1 Short-term incapacity

Short term incapacity refers to cases in which the injured Reservist has intermittent periods of incapacity, but is able to continue Reserve service, i.e. where the incapacity is not likely to be ongoing or continuous, preventing further Reserve service.

The objective in short term incapacity cases is to ensure, wherever possible, that compensation paid reflects the Reserve earnings lost during the particular week the person is incapacitated for i.e. the person may claim for a week that includes a camp they could not attend.

The actual days (and rate of pay and allowances the person would have received) that the incapacitated member would have been expected to parade during the period of incapacity must be confirmed by Defence via the Single Access Mechanism (SAM).  

5.3.1.2 Long-term incapacity – current year of service.

Long-term incapacity refers to cases in which the injured Reserve force member is unable or unlikely to return to Reserve service as a consequence of the compensable condition.

Two established options for calculating the Reserve component of NWE in long-term incapacity cases are:

1. Current Year of Service - where the calculation is based on an estimate of the actual Reserve service which the client would have undertaken in the year of injury, or
2. History of Service - where the calculation is based on the number of days of Reserve employment undertaken by the client in the 12 months before the injury i.e. a one year relevant period.

5.3.1.3 Current year of service

The Current year of Service method uses the following calculation:

Where:

• PA = number of parades attended between beginning of the financial year and day before period of incapacity for work.
• EP = number of parades the member would reasonably have been expected to attend for the remainder of the year (as verified by Defence) but for the injury and incapacity for work.
• DP = average daily rate of pay per day/parade for rank and pay level (plus allowances) based on the average number of hours of attendance per parade.

  Multiplying the result by 6/313 converts the annual figure to a weekly figure. This is not a legislated formula.

The ADF Pay and Conditions Manual (PACMAN) states that members of the Reserve Forces on Reserve service, apart from those officers who hold special appointments, are paid as follows:

• for a period of not less than six hours – one day’s pay

• for a period of less than six hours but not less than three hours – one-half day’s pay

• for a period of less than three hours but not less than two hours – one-third day’s pay, and

• for a period of not less than one hour but less than two hours – one-sixth day’s pay.

The number of training days and events for which individual members would have been required during the financial year must be confirmed by Defence (in most cases via the SAM).

5.3.1.5 Long-term incapacity - history of service

The History of Service method use the following calculation:

Where:

• NP = number of days/parades attended by the member during the previous 12 months*.
• DP = average daily rate of pay per day/parade for rank and pay level based on the average number of hours of attendance per parade.

  Multiplying the result by 6/313 converts the annual figure to a weekly figure. This is not a legislated formula

• for a period of not less than six hours – one day's pay

• for a period of less than six hours but not less than three hours – one-half day's pay

• for a period of less than three hours but not less than two hours – one-third day's pay, and

• for a period of not less than one hour but less than two hours – one-sixth day's pay.

5.3.2 Calculating civilian pay and allowances

There are two methods for calculating civilian earnings for injured Reservists under DRCA:

1. actual civilian earnings; and
2. deemed civilian earnings.

If the person is actually in employment their actual fortnightly civilian earnings should be used. The delegate should choose the option which best provides a fair representation of what the person could reasonably have expected to earn in civilian employment but for their injury.

5.3.2.1 Option A - Actual civilian earnings

Actual civilian earnings should be used in most cases where the Reservist has full-time or part-time civilian employment as well as his/her Reserve employment. If the NWE, calculated using the person’s actual earnings, is less than the NWE deemed in relation to unemployed Reservists i.e. using the '7 x the daily reserve rate of pay' (section 5.4.2.1), their NWE should be adjusted to be equal to ‘'7 x the daily reserve rate of pay'.

5.3.2.2 Option B - Deemed civilian earnings

Deemed civilian earnings should be used where the Reservist is not in civilian employment at the time of the injury, or is not working to their capacity, but has employable skills.  In such cases, an earning capacity in civilian employment can be deemed using the following options:

1. Deem the individual's NWE to be equal to an amount he/she would have been able to earn in suitable employment (see the definition in Section 4) having regard to such matters including age, experience, training, skills, qualification, etc.; or
2. Using the 'deeming' power provided by Section 8, determine the individual's NWE to be an amount equal to '7 x the daily reserve rate of pay'.

5.3.2.3 Deemed at ‘7 x the daily Reserve rate of pay’

This method deems NWE as 7 x the person’s daily rate of Reserve pay. Generally it is used in two situations:

1. where the Reservist has no civilian earnings; or
2. where the Reservist has civilian earnings from employment, but these are so low that NWE would be less than 7 x Reserve rate of pay.

If this deemed rate is used, the salary from civilian employment is as NIL to avoid an over-estimation of NWE.

Tax status of payment

Incapacity payments for loss of part-time Reserve income are not taxable. This is because the payments retain the original nature of the salary payment (which is non-taxable). Reserve earnings are not taxable, so compensation for loss of ability to earn in the Reserve is also considered not to be taxable.

Where NWE is deemed using the '7 x daily Reserve rate' method, all of the weekly compensation payment is not taxable.

*  Based on a 2-week example period before the onset of incapacity.

**  Based on a 2-week example period when continuously engaged in civilian work but prior to CFTS.

***  Based on 1 year example period prior to CFTS.

Delegates have the discretion to determine a different example period as is considered reasonable under Section 113(2).

Service giving rise to injury – Part-time Reserve – Section 95-100

The following formula is applicable when the person:

• Was injured during part-time service

• Is currently serving

• Current service is in the Part-time Reserve

  NE = ADF component (Reserve pay and allowances) for the week + civilian component (civilian pay and allowances) for the week

  Where:

• ADF component for the week is based on how much the Reservist would have earned for the week as a Reservist if not incapacitated for service

• Civilian component for the week is based on how much the reservist would have earned from civilian work based on a period before the onset of incapacity.

  The components are calculated according to whether or not the person is incapacitated for (Defence) service or for (civilian) work.

Calculating ADF Reserve pay and allowances

The ADF component for a Reservist incapacitated for (Defence) service is calculated in accordance with section 96 [2]:

ADF component = Reserve days for the week x Reserve daily rate of pay + pay related allowance days for the week x amount of pay related allowance

The delegate must obtain details from Defence (via SAM) 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:

ADF component = 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 (and the person is compensated for their civilian loss only).

Calculating civilian pay and allowances

The civilian component for a Reservist who is incapacitated for (civilian) work is calculated in accordance with section 98 [2]:

Civilian component = average number of days engaged in civilian work  x  civilian daily earnings

Where:

• Civilian daily earnings for those working before the onset of the incapacity = civilian daily hours     x     civilian rate of pay including overtime and allowances

Example Period

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.

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 calculated in accordance with section 100:

Civilian component = Actual civilian earnings for the week including allowances other than expense allowances. 

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

The following formula is applicable when the person:

• Was injured in PF or CFTS

• Is currently serving

• Current service is in the Permanent Forces or CFTS

where:

• normal ADF rate of pay means the amount of pay the member would have received for the week as a PF member if not incapacitated for service; and

• normal pay related allowances means the total compensable pay related allowances that the member would have received for the week if not incapacitated for service – see section 4.6.

The military pay scales are used to establish normal ADF pay (which, where applicable, includes Service Allowance).

The following formula is applicable when the person:

• Was injured in PF service

• Is currently serving

• Current service is in the Part-time Reserves

where:

• normal ADF rate of pay for the week is the amount the Reservist would receive if he or she was still a member of the Permanent Forces and not incapacitated for service. The member's rank and pay group at the time of his discharge from the Permanent Forces is the basis for determining NE.  Any subsequent promotions obtained while a Reservist after discharging from the Permanent Forces do not count towards the calculation of NE.

• pay-related allowances for the week is the amount of compensable pay-related allowances he or she would receive if still a Permanent Forces member and not incapacitated, as advised by Defence. 

• Remuneration amount is a loading included in normal earnings to compensate a member for the non-salary benefits of being a full-time serving member.  It is only included in normal earnings where normal earnings are calculated by reference to a full-time ADF rate of pay and the person is no longer a full-time serving member.

The following formula/s is applicable when the person:

• Was injured in Permanent Forces or CFTS service

• The last period of FT service was CFTS

• Is currently serving

• Current service is in the Part-time Reserves

The person has a choice to take as normal earnings either their full-time ADF earnings or their pre-CFTS earnings.  The person must inform the delegate of the choice in writing and once made, it cannot be changed for that period of incapacity.  A person may choose a different basis of normal earnings for further separate and discrete periods of incapacity i.e. the person gets a new choice in calculation method when there is a break in the period of incapacity.

5.7.1.1 Calculating Full-time ADF Earnings – section 109

where:

• Full-time ADF earnings is the amount the Reservist would receive if he or she was still on CFTS and not incapacitated for service. The members current rank and pay group is the basis for determining NE.  In this scenario as the person’s CFTS and subsequent part-time Reserve service are the same service type (i.e. Reserve), any promotions in Reserve service can be applied to the calculation.  

• Pay-related allowances for the week is the amount of compensable pay-related allowances he or she would receive if still a Permanent Forces member and not incapacitated, as advised by Defence.

• Remuneration amount is a loading included in normal earnings to compensate a member for the non-salary benefits of being a full-time serving member.  It is only included in normal earnings where normal earnings are calculated by reference to a full-time ADF rate of pay and the person is no longer a full-time serving member.

OR

5.7.1.2 Calculating Pre-CFTS earnings – section 111

Where the person was working before beginning the last period of CFTS:

Where:

• Pre-CFTS pay for the week = (pre-CFTS civilian weekly hours worked x pre-CFTS civilian rate of pay) + allowances (including overtime).

Example Period

The example period to calculate pre-CFTS pay is normally the last 2-week period the person was engaged in work ending immediately before the last period of CFTS.  If the example period does not fairly represent the person's pay (including overtime the person would have usually worked), the delegate may determine a different 2-week period or a period of different length.

If the person was not engaged in work, then pre-CFTS pay is defined as nil.

Where:

• Reserve pay for the week = Reserve days x Reserve daily rate of pay plus pay-related allowances as advised by Defence. This is calculated based on the person’s history of service over a one year period, see section 5.3.1.5.

Example Period

The example period to calculate Reserve pay is the 1-year period during which the person was a part-time Reservist immediately before the last period of CFTS, or such a period as the delegate determines is reasonable.

NWE is capped at the greater of the weekly earnings the person would receive if they had continued in the same employment they had at the date of:

• their injury; or
• their discharge.

The person’s NWE should be investigated at both points in time. Often the person will be earning more at their date of discharge i.e. as a result of promotions, pay increases etc. than at the date of injury though exceptions to this will occur i.e. the person may have been receiving allowances at their date of injury (see section 4.6), or the person may have been transferred to a different corps with a lower pay group.

5.8.1 Normal Weekly Hours (NWH)

Normal Weekly Hours (NWH) is the number of hours per week worked by the person before their injury.

The following formula is applicable when either a person:

• was injured in PF and is discharged from PF service; or

• was injured in CFTS and is discharged from all forms of service.

where:

• normal ADF rate of pay means the amount of ADF pay the member would have received for the week if not incapacitated for service; and

• normal pay related allowances means the total compensable pay related allowances that the member would have received for the week if not incapacitated for service (see section 4.6).

The formula for calculating NWE under section 8(1) relies on average weekly hours and pay rates, as PF or CFTS members are not paid by the hour, and their salary does not vary, NWE is instead determined by their full-time ADF rank and salary. 

The military pay scales are used to establish normal ADF pay (which, where applicable, includes Service Allowance). See section 4.5.3 for information on indexing the ADF component of NWE for a discharged member.

As a general principle all periods of Permanent Forces service are treated as a single whole period. Periods of Reserve serivce, whether full-time or part-time, are treated separately. That is, where a person covered by DRCA has separate periods of PF and Reserve service they are regarded separately for the purpose of calculating NWE.

The following examples set out how NWE is determined:

            Permanent Force service gives rise to injury

• A person is injured during PF service and discharges completely and no longer serves with the ADF. NWE is the discharge rank and pay that is indexed in accordance with ADF pay increases until 1/10/2001 and then indexed in accordance with Wage Price Index (WPI) thereafter.

• A person is injured during PF service, subsequently discharges and transfers to Reserves. NWE is the discharge rank and pay from the PF service and indexed in accordance with WPI, even while the person continues to serve in the Reserves. Promotions that are attained during the Reserve service will not be included in the calculation of NWE.

      CFTS gives rise to injury

• A person is injured during a period of CFTS as a Reservist, later they transfer back to part-time Reserves and then discharges. NWE is based on the discharge rank and pay (from the Reserves) but will be the equivalent of the full-time salary indexed in accordance with ADF pay increases until 1/10/2001 or discharge (whichever is the latter), and indexed in accordance with WPI after discharge from the Reserves. Promotions that were attained during the part-time Reserve service will be included in the calculation of NWE.

• A person is injured during CFTS as a Reservist, later transfers back to part-time Reserves and continues to serve. NWE is the equivalent full-time rank and pay as the Reservist’s current rank and pay and indexed in accordance with ADF pay increases. Promotions are included in the NWE calculations. Note: This person is a current serving member and this scenario is covered in Chapter 5.2 of the Incapacity Policy Manual.

5.9.1 Normal Weekly Hours

Normal weekly hours for a former member who was injured in PF or CFTS service is 36.75hrs.

The following formula is applicable when the person:

• Was injured in part-time reserve service

• Is discharged from all forms of service

• Is engaged in civilian work or has employable skills

Where:

• Reserve pay and allowances means the reserve pay and allowances the member would have received for the week if not incapacitated for work; and

• civilian pay and allowances means the civilian pay and allowances that the member would have received for the week if not incapacitated for work.

5.10.1 Calculating ADF Reserve pay and allowances

The established method to calculate Reserve pay and allowance for a person who is considered incapacitated long-term is as per the method outlined in section 5.3.2.3 for serving members i.e. using an example period of 1 year prior to the injury or discharge, preferring the greater of the two. Additionally, the delegate has the discretion to use a different relevant period.

5.10.2 Calculating civilian pay and allowances

The method used to calculate civilian pay and allowances for a discharged member is as per the methods outlined in section 5.3 for serving members.

The sample period should consider both pre-injury and pre-discharge pay and prefer the greater of the two.

It is important that the same sample period i.e pre-discharge or pre-injury is used for both the reserve pay and allowances, plus civilian pay and allowances.

Once discharged from the ADF, the only mechanism for advancing the civilian component of NWE is by indexation using the WPI. Where a discharged client is still employed by the Commonwealth in their civilian capacity, NWE can only be advanced by WPI indexation.

5.10.3 Normal Weekly Hours

Normal weekly hours is equal to the person’s normal reserve hours plus their normal civilian hours.

The method for calculating NWE for a person who was not engaged in employment and has no employment skills is to deem NWE equal to 7 x the reserve daily rate as per section 5.3.2.3.

*  Civilian pay & allowances (and normal weekly hours) are based on a 2-week example period during which the person was continuously employed prior to beginning a period of CFTS and prior to discharge.

**  Reserve pay & allowances (and normal weekly hours) are based on a 1-year example period prior to beginning a period of CFTS and prior to discharge.

Delegates have the discretion to determine a different example period as is considered reasonable.

Note: Anomalous cases outside the scenarios in the above table should be referred to Policy for advice via the CAL.

5.12.1 Normal Weekly Hours (NWH)

Normal Weekly Hours (NWH) is defined in the table at Section 132(2). NWH are necessary for calculations after the Maximum Rate Weeks (i.e. 45 weeks). For part-time Reservists NWH are defined in section 158.

The following formula is applicable when the person:

• Was injured in PF

• Is discharged

• Last service immediately before ceasing to be a member was as a PF member (section 141) or part-time Reservist and the last period of FT service was as a PF member (section 164).

Note: If the person's last service was a part-time reservist and their last FT service was CFTS, then section 168 or section 170-172 applies. See section 5.14.

where:

• ADF rate of pay means the amount of pay the member would have received for the week as a PF member if not incapacitated for service.

• pay related allowances means the total compensable pay-related allowances that the member would have received for the week as a PF member if not incapacitated for service.

• Remuneration amount is a loading included in normal earnings to compensate a member for the non-salary benefits of being a full-time serving member.  It is only included in normal earnings where normal earnings are calculated by reference to a full-time ADF rate of pay and the person is no longer a full-time serving member.

The military pay scales are used to establish normal ADF pay (which, where applicable, includes Service Allowance).

The former member's rank and pay group at the time of his discharge from the Permanent Forces is the basis for determining NE.  Any subsequent promotions obtained while a Reservist after discharging from the Permanent Forces do not count towards the calculation of NE.

5.13.1 Normal weekly hours

Normal weekly hours for a former member whose last service before discharge was as a PF member or part-time Reservist is 37.5hrs.

The following formula is applicable when the person:

• Was injured in CFTS

• Is discharged

• Last service immediately before ceasing to be a member was as a CFTS member (section 144 or 147-149) or as a part-time Reservist and the person's last FT service was as a CTFS member (section 168 or 170-173)

Note: If the person's last service was as a part-time reservist and their last FT service was as a PF member, then section 164 applies. See section 5.13.

The person has a choice to take as normal earnings either their full-time ADF earnings or their pre-CFTS earnings.  The person must inform the delegate of the choice in writing and once made, it cannot be changed for that period of incapacity.  A person may choose a different basis of normal earnings for further separate and discrete periods of incapacity.

5.14.1 Calculating Full-time ADF Earnings – section 144 (last service was in CFTS) or 168 (last service was in part-time Reserve)

where:

• Full-time ADF earnings is the amount the Reservist would receive if he or she was still on CFTS and not incapacitated for service. The members rank and pay group at discharge is the basis for determining NE.  In this scenario as the person’s CFTS and subsequent part-time Reserve service are the same service type (i.e. Reserve), any promotions in Reserve service can be applied to the calculation. 

• Pay-related allowances for the week is the amount of compensable pay-related allowances he or she would receive if still a Permanent Forces member and not incapacitated, as advised by Defence.

• Remuneration amount is a loading included in normal earnings to compensate a member for the non-salary benefits of being a full-time serving member.  It is only included in normal earnings where normal earnings are calculated by reference to a full-time ADF rate of pay and the person is no longer a full-time serving member.

OR

5.14.2 Calculating Pre-CFTS earnings – section 147-149 (last service was in CFTS) or 170-173 (last service was in part-time Reserve)

Where the person was working before beginning the last period of CFTS:

Where:

• Pre-CFTS pay for the week = (pre-CFTS civilian weekly hours worked x pre-CFTS civilian rate of pay) + allowances (including overtime). 

Overtime is only included when the person is working regular overtime.

Example Period

The example period to calculate pre-CFTS pay is normally the last 2-week period the person was engaged in work ending immediately before the last period of CFTS.  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.

If the person was not engaged in work, then pre-CFTS pay is defined as nil.

Where:

• Reserve pay for the week = Reserve days x Reserve daily rate of pay plus pay-related allowances as advised by Defence. This is calculated based on the person’s history of service over a one year period, see section 5.3.2.3.

The example period to calculate Reserve pay is the 1-year period during which the person was a part-time Reservist immediately before the last period of CFTS, or such a period as the delegate determines is reasonable.

5.14.3 Normal weekly hours

Normal weekly hours for a former member whose last service was as a CFTS member or part-time Reservist is calculated as: 

where:

• ADF hours are the average worked out over the Reserve example period; and

• pre-CFTS hours are those used in calculating pre-CFTS pay.

The following formula is applicable when the person:

• Is discharged

• Last service was in the Part-time Reserves

• Is engaged in civilian work immediately before ceasing to be a member (section 154-155).

Where:

• ADF component for the week is based on how much the Reservist would have earned for the week if still a part-time Reservist if not incapacitated for service, based on the person’s rank and pay at date of discharge.

• Civilian component for the week is based on how much the reservist would have earned from civilian work based on the period immediately before ceasing to be a member.

Where a Reservist has lost the civilian work they were engaged in at the time of the injury and therefore was not in civilian employment at the time of discharge, the delegate should determine that the example period is the 2-week period when the person was last engaged in civilian work.

5.15.1 Normal Weekly Hours

Normal weekly hours are defined as:

Where:

• defence days is the average number of days per week in the example period paid as a part-time Reservist and defence hours is the average number of hours per day during the example period the person was paid as a part-time Reservist.

NWH for Reserve service is calculated using the following formula:

5.15.2 Reserve hours

Members of the Reserve Forces on Reserve service, apart from those officers who hold special appointments, are paid as follows:

• for a period of not less than six hours – one day's pay

• for a period of less than six hours but not less than three hours – one-half day's pay

• for a period of less than three hours but not less than two hours – one-third day's pay, and

• for a period of not less than one hour but less than two hours – one-sixth day's pay.

The following formula is applicable when the person:

• Is discharged

• Last service was in the Part-time Reserves

• Is not engaged in civilian work immediately before ceasing to be a member (section 161).

Where:

• rate of pay means the daily rate that would be paid if the person was still a part-time Reservist.

• pay-related allowance days means the average number of days per week served each week during the example period for which the person was paid an allowance.

• pay-related allowances are those that would be paid if the person was still a part-time Reservist (for a period advised by Defence).

Note: pay-related allowance days must be determined using an example period to establish the amount of days per week they should apply. Allowances are not multiplied by 7.

Chapter 3.7.2 provides guidance on the MRCA example period.

Incapacity payments for loss of part-time Reserve income are not taxable. This is because the payments retain the original nature of the salary payment (which is non-taxable). Reserve earnings are not taxable, so compensation for loss of ability to earn in the Reserve is also considered not to be taxable. This is also applicable when NE is calculated by reference to seven times the daily rate of Reserve pay i.e. the incapacity payments are not assessable for income tax purposes.

5.16.1 Normal Weekly Hours

Normal weekly hours (NWH) are 37.5hrs.

Normal weekly hours (NWH) are 37.5hrs.

The method to calculate earnings from self-employment is used for both NE/NWE and AE (actual earnings/able to earn). There are multiple methods to calculate earnings from self-employment and discretion should be used to pick the method that best represents the person’s earnings.  The same method should be used to calculate both the person’s NE/NWE and the person’s AE. See section 8.6.

5.17.1 Unearned income is not to be included in NE/NWE

Any income the person may be receiving purely from the application of their capital, i.e. bank interest, purchase of an 'allocated pension', interest from a managed investment fund, capital gains from property etc. cannot be included in the calculation of NE/NWE (or AE). Only taxable income which can be attributed to the client's mental or physical labour can be considered.