The policy in relation to allowances has been revised in line with the outcome of Comcare v Simmons [2014] FCAFC4 (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 revised policy is based on the Jurisdictional Policy Advice No. 2015/01.
31.11.1 Application of the policy
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 Reconsiderations and Appeals section.
31.11.2 Legislation
NWE is calculated in accordance with section 8. 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 SRCA 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 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.
31.11.3 Allowance types to include in NWE
The following types of allowances should be included in the calculation of NWE:
allowances the person was actually receiving prior to the injury;
allowances which are taxable (i.e. pay related allowances);
allowances which continue to be paid during leave; and
allowances which are paid in respect of specific skills or qualifications attained by the person (i.e. allowances paid for licences, tickets, certificates).
The following types of payments should not be included in the calculation of NWE:
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).
Example 31.11.3
A member who was attempting to transfer from infantry corps to Special Forces is injured during corps training, subsequently the member is never transferred and never begins to receive the Special Forces Disability Allowance (SFDA). The member submits a claim for compensation for lost SFDA. Incapacity payments are not made as the member cannot be compensated for any prospective pay and/or allowances that they would have received upon completion of training (i.e. an allowance they are not yet receiving). NWE must be based on the pay and allowances they were receiving prior to the onset of their injury.
31.11.3.1 Pay-related allowances
Pay-related allowances are those allowances determined by the Defence Minister for the purposes of the MRCA. The SRCA 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 i.e. the uniform allowance is not a pay-related allowance and should be excluded from NWE (as it is for expenses incurred in maintaining a uniform).
The length of time that allowances are to be included in NWE depends on whether the person is serving or not and the type of allowance (discussed in section 31.11.4 and 31.11.5).
31.11.3.2 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. Disability allowances are paid based on certain conditions being met, some of which rely on the member holding certain skills and qualifications before being eligible for payment.
31.11.3.2.1 Special Forces Disability Allowance (SFDA) formerly Special Action Forces Allowance (SAFA)
The Special Action Forces Allowance (SAFA) historically comprised two distinct elements:
Qualification and Skill (Q&S); and
Disability
The Qualification and Skill component acknowledged the level of additional skills acquired and maintained by Special Forces personnel. The Disability component acknowledged the hazard and stress associated with service within the Special Forces environment.
As a result of the Australian Defence Force (ADF) Remuneration Reform Project, the Qualification and Skill component of SAFA was rolled into salary with effect from 9 August 2007. Accordingly the allowance now only consists of the Disability component, and has been renamed the Special Forces Disability Allowance (SFDA).
The cases of Kennedy and Military Rehabilitation and Compensation Commission [2007] AATA 19 (15 January 2007) and Hillman and Military Rehabilitation and Compensation Commission [2011] AATA (28 January 2011) was used to guide policy on the inclusion of SFDA in NWE prior to Simmons on 13 February 2014.
31.11.4 Including allowances in NWE for a person who is serving
Subsection 8(10)(a) 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 (link to procedures).
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.
Example 31.11.4.1
A member of 3 RAR is injured whilst participating in a parachute jump. The member is parachute qualified, posted to a parachuting unit and receiving Paratrooper Allowance. The injury prevents the member from ever being able to parachute again. The Paratrooper Allowance is included in NWE for the remaining duration of the members posting to 3 RAR.
The member is then posted to a non-parachuting unit (for a reason unrelated to their injury) where they would not have received Paratrooper Allowance. Paratrooper Allowance is not included in their NWE for the duration of this subsequent posting.
Later, the member is posted to a special operations unit, where they would have received Paratrooper Allowance if they were able to parachute, however they are unable to qualify because of their injury. The allowance should now be included in their NWE as the reason the allowance was originally removed (and NWE reduced) was due to the allowance being no longer available to them (due to a posting to a different unit for a reason unrelated to their injury). As the allowance would now have been available to the member but is not, due to the injury, the member should be compensated.
31.11.5 Including allowances in NWE for a person who is discharged
Subsection 8(10)(b) 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 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. However, all allowances that were included in calculations of NWE may not be included in calculations of NWE indefinitely.
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.
In determining whether an allowance should be included in NWE for a discharged member, delegates should consider the basis on which that allowance was paid. Allowances paid on the basis that the person has specific skills should continue to be included in NWE, 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.
Alternatively an allowance that is paid only on the basis of particular employment conditions (with no skills based component) are only payable 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. The date that these allowances would have ceased should be confirmed by Defence.
The following website can be used to confirm an allowance has a skills based component: http://www.defence.gov.au/PayAndConditions/ADF/Chapter-4/Part-2/Part-C-Div-2.asp
Example 31.11.5.1
A person discharged from the ADF at their own request. NWE is calculated at the date of their injury and at the date of their discharge. At the date of their injury the person was on deployment. A member 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.
The person was receiving their salary as a Private Pay Group 9, Special Forces Disability Allowance (SFDA), Deployment Allowance, Separation Allowance and Field Allowance. At the date of their discharge the person was receiving their salary as a Private Pay Group 9 and SFDA.
The person’s NWE is higher at the date of their injury due to the inclusion of the Deployment Allowance, Separation Allowance and Field Allowance. However, these allowances are paid only as a result of certain employment conditions, i.e. a deployment, and cannot continue to be included in NWE beyond the date the deployment would have ceased (as confirmed by Defence).
In this example the person’s NWE would be based on their salary as a Private Pay Group 9 plus the SFDA (as this allowance is reliant on the person having certain skills). NWE is calculated as at the rate applicable at date of discharge, beyond which the person’s NWE would be adjusted in line with the Wage Price Index (WPI).