Date amended:
External
Policy

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).

NE = 7 x Reserve daily rate of pay + (pay-related allowance days for the week x amount of pay-related allowances for a day)

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.

5.16.1.1 

Example

A former Reserve member was medically discharged on 1 December 2007 due to a back injury for which liability has been accepted.  Prior to sustaining the back injury the person was in receipt of Centrelink benefits and undertook 3 – 4 days of Reserve employment in most weeks.  At discharge the person had no civilian employment and had been receiving incapacity payments based on an NE equal to the national minimum wage for the previous 14 months. At discharge his NE changes to be calculated accordingly to the formula:

7     x     person's daily rate of Reserve pay and allowances

The daily rate of reserve pay as a Private was $87.58.

7     x     $87.58     =     $613.06 per week

After 45 weeks incapacity payments are reduced to:

75%     x     $613.06     =     $459.80 per week

Normal weekly hours (NWH) are 37.5 in accordance with subsection 132(2).  This will be relevant in calculating the former Reservist's incapacity payments if they return to work after the maximum rate weeks have expired.

Note:

Section 179 and the national minimum wage continues to be the basis of determining the person's NE after 45 weeks however, he only receives a percentage of NE appropriate to the hours worked in a week.