Establishing the amount of deemed earnings
Deeming an ability to earn - "suitable employment"
In order to apply s 19(4) of the SRC Act, the Delegate must be satisfied that the AE amount is from “suitable employment”, as defined in s 4(1) of the SRC Act, albeit that the client may not be able to obtain actual suitable employment. When considering what is “suitable employment”, the Delegate should have regard to the client's:
- education;
- employment history;
- training;
- medical restrictions.
As an example, a General Hand who has been retrained in clerical skills could be deemed able to earn as an Administrative Service Officer in the Australian Public Service (APS), or an equivalent capacity in a State/Territory Public Service or in private enterprise, provided they meet all relevant entrance criteria. A Pilot who has been retrained in Microcomputer Technology could be deemed as able to earn as an Information Technology Officer in a similar range of employment environments.
In cases where the client is actually in employment, the Delegate has the power to deem a higher weekly AE amount where evidence exists to indicate that the client has a capacity to earn more than their actual earnings. For example, there may be evidence that the client has chosen, for lifestyle reasons, to work part-time even though they have the actual capacity to work full-time.
If the client can show, through genuine and unsuccessful attempts to obtain employment, that he/she lacks the ability to find employment because of their injury, the ability to earn should be treated as nil.
Where a client engages in self employment, the Delegate could determine a notional “able to earn” amount by reference to the greater of:
- the net taxable income of the business; or
- the cost of employing another person to do the work the client is doing in the conduct of the business.
If the business is making a loss, it is NOT permissible to treat the AE amount as a negative amount.
Where a client's earnings vary from week to week, the Delegate may determine a notional able to earn amount by establishing the type of employment and the hours per week that constitutes suitable employment for that client. Then, by applying the appropriate industrial award rate of pay, a notional able to earn amount may be determined. The reason for a client's reduced work hours must be as a result of the injury rather than the availability of work.
It is suggested that a period of at least 3 months be reviewed to derive an average upon which the notional able to earn amount is to be based. Where the Delegate is dealing with an entitlement to arrears of compensation, it is appropriate for an average to be drawn from the whole of the period of the arrears.
Client moves to area of low employment
In some cases, a client who otherwise has an ability to earn in suitable employment will move to an area of low employment opportunities for personal or lifestyle reasons and due to the lack of employment opportunities is not able to obtain employment. In such cases, the Delegate must look to the reason that the client suffers a loss: is it because of the effects of the compensable condition or is it due to their personal choice to move to an area of low employment opportunities? In the latter case, the client should be deemed with a partial or total AE depending on the extent to which he or she would otherwise have been able to earn.
Such deeming should also be applied in cases where the member has elected to discharge to an area with low employment opportunities. The same test must be applied: is the loss due to the effects of the compensable condition or is it due to a personal choice to move to an area of low employment opportunities? An exception to this rule exists where the discharging member has maintained a family home in the area and returns at time of discharge to that family home. Note that it is not sufficient that the member simply has family in the area.
Deemed AE is increased in line with WCI increases
Where an AE for a discharged client is established by deeming, the AE amount is increased each 1 July by the WCI % amount – this has the effect of increasing compensation at the same rate as the WCI increase and neither advantages or disadvantages the client.