3.6.1 Duration ADF allowances are compensated for (difference between DRCA and MRCA)

3.6.2 Compensation for lost allowances

The calculation of Normal Weekly Earnings/Normal Earnings includes a component to compensate for allowances that form part of the earnings the person has lost due to injury.

In order for an allowance to be compensated, the person must have been actually receiving it prior to the injury (with the exception of those injured in initial training). The allowance must also be taxable. 

The following should not be included in the calculation of NWE/NE:

• allowances for money spent (or likely to be spent) by the person on expenses (i.e. travel allowance, tropical clothing allowance);
• allowances that the person is not yet receiving i.e. a member who is injured whilst undertaking pre-deployment training and who cannot subsequently deploy because of that injury, cannot be compensated; and
• retention bonuses (these are not usually paid as an allowance but rather as a lump sum payment and are not considered allowances).

Note: Payment of an allowance as a lump-sum does not automatically exclude it from being included in NWE/NE as some pay-related allowances are paid as an annualised lump-sum payment. For further information on allowances that have been determined as pay-related allowances, please see 3.6.7 Pay-related Allowances below. 

*Only if the allowance is to compensate for money spent i.e. meals, hotel etc. rather than it being a component of wages (taxable). If required delegates should confirm this with the employer.

**For periods prior to 13 May, 2021

3.6.3 Types of ADF allowances

3.6.3.1 Service Allowance

The ADF salary structure allows for payment of Service Allowance, in addition to the basic salary, to members of the permanent force who are holding certain ranks. As a result of the ADF Employment Offer Modernisation Program, the Defence Force Remuneration Tribunal have determined that Service, Reserve, Trainee and Uniform Allowances are ‘rolled into’ members’ salary, to establish ‘Military Salary’ with effect from 13 May, 2021.

For periods prior to 13 May, 2021, where Service Allowance is payable, it should be incorporated into the member/ex-member's NWE/NE.

3.6.3.2 Disability Allowances

Disability allowances compensate a serving member for the disabilities associated with service, generally within a specific service environment i.e. a work environment that is hazardous/uncomfortable/stressful etc., the location of service i.e. a remote posting or time spent away from their dependents, or the type of service duties i.e. diving or flying.

3.6.3.2.1 Deployment Allowances

A member of the ADF deployed on warlike or non-warlike service generally receives three separate pay-related allowances:

• Deployment Allowance or International Campaign Allowance;
• Field Allowance; and
• Separation Allowance.

These allowances have been determined as pay-related allowances. When a member is medically evacuated back to Australia due to a service related injury or disease, they may become entitled to compensation for loss of deployment allowances.  

The duration for payment of these allowances varies and is summarised below.

3.6.3.2.2 War Service leave and additional recreation leave

War service leave is an additional leave benefit for a member who is on warlike service. A member on non-warlike service may also accrue additional recreational leave. When a member is returned from deployment early due to an accepted condition and suffers a loss of allowances they would have received for those accrued War Service/recreation leave days, those allowances can be compensated. However, there is no provision to compensate a person for the leave days not accrued.

3.6.3.3 Pay-related allowances

Pay-related allowances are those allowances determined by the Defence Minister for the purposes of the MRCA.  The DRCA does not reference allowances which are pay-related, however delegates may use the determination of an allowance as pay-related as an indication of whether the allowance should be included in the calculation of NWE.

3.6.3.4 Salary Non-Reduction allowance

A salary non-reduction allowance is a pay-related allowance. The salary non-reduction allowance should be treated as any other pay-related allowance i.e. delegates will need to establish in each case (via the Request Management System (RMS)) when the allowance would have been adjusted and when it would cease. Further information around when non-reduction allowances would be adjusted and the period for which they are usually payable, can be found at: Defence Pay and Conditions - Division 5 Salary non-reduction provisions.

3.6.3.5 Annualised Pay-related allowances

A member may receive a pay-related allowance as a lump-sum (i.e. annualised) - for example, Language Allowance is paid annually as a lump sum. As with all pay-related allowances, delegates need to confirm with Defence the date to which the allowance would be payable if not for the incapacity.

Language allowance is a proficiency-based allowance payable for a set period, after which members are required to 're-qualify' to continue receiving the allowance. Where a member who has received an annual Language Allowance discharges from ADF service within the period, the allowance may be included in NE until the date advised by Defence.

Where an annualised allowance is payable, delegates can convert the lump sum to a weekly amount to inlcude in NE.

3.6.4 DRCA policy

3.6.4.1 Legislation

NWE is calculated in accordance with section 8 [3]. NWE is calculated as the person’s average weekly earnings before the date of injury with adjustments made based on employment and other factors arising after the injury.

Section 8(1) of the DRCA defines allowances ('A') in the formula for calculating NWE as:

'A is the average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period, other than an allowance payable in respect of special expenses incurred, or likely to be incurred, by the employee in respect of that employment'.

The relevant period (example period) is defined in section 9 [3] and is generally the 2-week period before the date of injury.  However there is some discretion for delegates to use a different period that more accurately reflects a person’s normal weekly earnings.

The intention of including allowances in NWE is to ensure that it is a fair reflection of what the client would have earned but for their injury.

3.6.4.2 Including allowances in NWE for a person who is serving

Subsection 8(10)(a) [3] applies to calculating NWE for a person who is continuing in service. This paragraph allows the NWE, calculated at the date of injury, to be adjusted to reflect the amount the person would receive if not incapacitated for work i.e. NWE should be reduced to ensure that the person does not receive more in compensation than they would receive in earnings if they were not incapacitated. 

In determining whether an allowance should be included in NWE for an incapacitated serving member, delegates should consider whether the allowance would still be available to the member if they had not been injured i.e. the allowance can only be included in NWE for as long as they would have received it if not injured (i.e. until the end of a posting or deployment etc.).

The duration of an allowance should be confirmed by Defence via the RMS.

Similarly, if the allowance no longer applies to their employment for reasons unrelated to their injury (i.e. the person changes corps or position and their new role does not attract that allowance), their NWE should be reduced by the amount of that allowance.

Delegates should consider the following when determining NWE (including whether an allowance should continue to be included in NWE):

• The weekly earnings of a non-injured colleague in the same pre-injury role performed by the member
• Whether certain allowances overtime/higher duties would currently be available to the member (or to the same extent) if not injured
• Whether any particular personal or career choices unrelated to the members injury would have reduced their current weekly earnings below their pre-injury earnings.

3.6.4.3 Including allowances in NWE for a person who is discharged

In accordance with the FFCA decision in Comcare v Simmons 2014 subsection 8(10)(b) [3] applies to calculating NWE for a person who has discharged from service. For a discharged member NWE is capped at the greater of the earnings they would have received at either:

1. date of the injury; or
2. date of discharge.

Delegates should establish whether a person’s NWE (that includes allowances the person was receiving) would be greater if they had continued in the employment they were engaged in at the date of injury; or the employment they were engaged in at date of discharge.

The Comcare Scheme guidance - calculating normal weekly earnings [2] provides detail on establishing NWE and the inclusion of allowances in NWE.  Delegates need to be satisfied that the allowance included would still be payable to the person in the week incapacity payments are payable.

The basis on which an allowance was paid will establish how long it is included in calculations of NWE for a discharged member. Allowances paid on the basis that the person has specific skills should continue to be included in NWE calculations indefinitely, as that allowance would continue to be payable to the person in future employment i.e. they retain that skill and would be paid for it in future employment. An example of this is Paratrooper Allowance or a Special Forces Disability Allowance.

An allowance that is paid only on the basis of particular employment conditions (with no skills based component) is only compensable for as long as those particular conditions of employment exist (i.e. until the end of a posting or contract). Once the work is no longer available the person would not continue to receive that allowance in the future. An example of this type of allowance is District Allowance or Separation Allowance.

Similarly, Higher Duties Allowance (HDA) is only compensable while certain factors exist - i.e. being in a certain location or someone else being on leave. If a person was in receipt of HDA at date of injury or date of discharge, the allowance would only be included in NWE for the period as advised by Defence.

The date allowances would have ceased should be confirmed by Defence via the RMS.

The following website can be used to confirm an allowance has a skills based component: http://www.defence.gov.au/PayAndConditions/ADF/Ch… [6]

The method of discharge i.e. medical or non-medical has no effect on the calculation of NWE. An allowance cannot be removed from calculations of NWE on the basis of discharge type only i.e. removed on the basis that a person has non-medically discharged from the ADF.

3.6.5 MRCA Policy

3.6.5.1 Legislation

The formula for calculating NE includes a component to compensate a person for the allowances they would have been paid if not for their incapacity. Subsection 91(3) [7] states the person’s ‘normal pay-related allowances’ are those “that would have been paid to the member for the week if the member were not incapacitated for service”.

Subsection 91(4) [7] states that “the Chief of the Defence Force must advise the Commission in writing of the date on which each compensable pay-related allowance would normally have ceased to be paid to the member if the member were not incapacitated for service.”

All requests for advice on when an allowance would have ceased if not for the incapacity must continue to be directed through the RMS in the first instance. The cessation date provided by the RMS is the default date and there is a presumption that it is correct. The claimant should not be provided with the option of providing an alternative date.

However, in the event the person disagrees with the allowance cessation date provided by Defence, and provides evidence of an alternative date specific to their service, the delegate must assess the evidence and make a decision accordingly. There is no expectation the delegate investigate beyond the evidence provided by the claimant.

Acceptable evidence may include one or more of the following;

• detailed information from the relevant Service Career Management Centre
• advice from the Unit Commanding Officer 

The information should provide details specific to the members service, such as the likelihood of the member continuing in a given role etc, were it not for their injury/medical discharge.  

Note: a statutory declaration from the member is not considered suitable evidence. 

Example scenario:

A former Navy clearance diver disagreed with the cessation date for Clearance Diver Allowance (CDA) obtained from Defence, via the RMS. The member provided a letter from the Commanding Officer of the Unit stating it was expected that but for their service-related injury, the member would have continued to be posted to an operational unit, and would have received the corresponding allowance. 

Section 11 [8] of the MRCA prescribes that the Minister for Defence must determine which allowances are pay-related allowances under section 58B or 58H of the Defence Act 1903. Only pay-related allowances can be included in the calculation of NE.

The person must also have been in receipt of the allowance immediately prior to the onset of incapacity (paragraph 91(5)(a)) [7] for the allowance to be compensable.  For example, a member who is injured whilst undertaking pre-deployment training and who cannot subsequently deploy because of that injury, cannot be compensated with lost deployment allowances.

Additionally, the pay-related allowance must have been:

• normally payable after completing initial training as discussed in section 189 [9]; or
• normally payable to a serving member after being promoted as per subsection 186(2)(b) [10].

3.6.5.2 Compensation for pay-related allowances immediately after medical discharge

Skills-based allowances such as Special Forces Disability Allowance (SFDA) and Flying Allowance, can be included in the calculation of NE immediately following discharge, and prior to advice from the CDF on an end date of that allowance where:

• the person was medically discharged; and
• there is evidence the person was receiving a skills-based allowance at date of discharge - such as an ADF payslip detailing the allowance and rate.

The standard procedures for requesting advice on allowances through the RMS should be followed, including procedures for escalating outstanding requests.

In cases where an overpayment has occurred, standard overpayment recovery procedures apply. 

Hardship allowances (i.e. an allowance for being in a certain location) are not to be included immediately. Delegates should wait for confirmation from the CDF on receipt and duration of payment prior to compensating a person for that loss.

3.6.5.3 The effect of method discharge on inclusion of allowances

A person’s method of discharge does not affect whether allowances are included in NE. It is up to the Chief of the Defence Force (CDF) to advise DVA on what date any pay-related allowance would have ceased if not for the incapacity.  In the case of a voluntary discharge, allowances are not lost as a result of the injury, rather as a result of the individual’s decision to leave the ADF. However, a decision cannot be made on that basis alone and instead a request must be made via the RMS in order to establish the date the allowance would have ceased if not for the incapacity (common sense would imply that the date advised by the CDF will be the same date as the date of the person’s discharge). However, if the CDF advises a date other than the discharge date then we must use that date.

Clients with 'dual discharges' (e.g. discharged administratively for disciplinary reasons and J5 medical classification) are eligible to receive incapacity payments. Administrative discharges do not invalidate a J5 determination, and can be applied in addition to a medical discharge. Therefore, for incapacity purposes, dual discharges are the same as a medical discharge provided that one of the accepted conditions is the reason for the J5 determination and the medical discharge on the MECRB minutes. Clients in this situation may be eligible to have pay-related allowances included in calculation of NE, depending on the advice from CDF.

3.6.6 Historical information/Policy

3.6.6.1 Graded Other Ranks Pay Structure (GORPS)

Historically, allowances were comprised of two distinct elements:

• Qualification and Skill (Q&S); and
• Disability

The Qualification and Skill component acknowledged the level of additional skills required in a role and the Disability component acknowledged the disabilities associated with certain environments.

As a result of the Australian Defence Force (ADF) Remuneration Reform Project, the Qualification and Skill component of most corps-related allowances were rolled into salary with effect from 9 August 2007 (along with streamlining the pay structure).  Accordingly most corps-related allowances now only consist of a disability component, this includes the Special Forces Disability Allowance (SFDA) formerly the Special Action Forces Allowance (SAFA). 

3.6.6.1.1 Claims for periods of incapacity that pre-date GORPS

The qualification and skill component of an allowance should be included in NWE/NE calculations indefinitely and the disability component included for only so long as it would have been received.

3.6.6.2 DRCA – Historic ‘Simmons’ information

The DRCA policy in relation to allowances was revised in line with the outcome of Comcare v Simmons [2014] FCAFC4 (Simmons) [1].

3.6.6.2.1 Pre ‘Simmons’

Prior to the date of this decision (13 February 2014), the inclusion of allowances in calculations of NWE was determined in accordance with the policy for calculating Normal Earnings under the MRCA. 

The cases of Kennedy and Military Rehabilitation and Compensation Commission [2007] AATA 19 (15 January 2007) [4] and Hillman and Military Rehabilitation and Compensation Commission [2011] AATA (28 January 2011) [5] were used to guide policy on the inclusion of SFDA in NWE prior to Simmons on 13 February 2014 i.e. paid depending on the individual circumstances of the case and advice from Defence on when the allowance would have ceased if not for the injury.

3.6.6.2.2 Application of ‘Simmons’

The revised policy is based on the Comcare Scheme guidance - Calculating normal weekly earnings [2].

This policy should be applied from 13 February 2014. Delegates are not expected to initiate a retrospective adjustment of decisions made prior to 13 February 2014 (i.e. if allowances have been removed from the calculation of NWE prior to 13 February 2014). Any requests for a reconsideration on a decision made prior to 13 February 2014 to remove allowances from the calculation of NWE should be referred to the Appeals and Reconsiderations section.

3.6.7 Pay-related Allowances

Every effort is made to keep the list below up to date, however, if an allowance is not included, delegates can check the determinations on which allowances are pay-related allowances via the following links:  https://www.legislation.gov.au/F2017L00505/latest/text 

The following have been determined as pay-related allowances:

Section 58B determination allowances

Section 58H determination allowances