5.3 DRCA - Service giving rise to injury is Part-time Reserve

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.