A self employed person can operate either as:
A person operating as a contractor may also be self employed and will appear as one of the above business structures for taxation purposes.
A self employed person is able to receive the LOE Allowance for a period of incapacity in which they have suffered a loss of earnings from an occupation in which they are engaged. A self employed person must remain 'engaged' in an occupation to be eligible; this is the same for a wage or salary earner. A self employed person who ceases to be self employed, is not categorised as engaged, and therefore is not eligible for the LOE Allowance.
For example, if an individual was running a landscaping business and is unable to work because of an accepted disability, suffers a loss of earnings and subsequently sells their landscaping equipment and lets insurances lapse or cease, then it may be taken as evidence that they are no longer self employed. The person is taken to be no longer engaged in an occupation for which they have suffered a loss of earnings, therefore the individual is not eligible for the LOE Allowance.
However, if a self employed person had intended to return to work after the period of incapacity and had taken reasonable steps to maintain the business entity during their period off work then they would be eligible for the LOE Allowance. Delegates will need to examine the facts and merits of each individual case and considerations may include, but are not limited to the following:
A self employed person can be eligible for the LOE Allowance even if they personally have not suffered a loss of earnings but the business they operate has had a reduction in revenue. More information can be found under The Amount of Lost Earnings [4].
The LOE Allowance may be granted in respect of any loss of after tax salary or wages or earnings. A person may suffer a partial loss of earnings; that is, they may still receive a salary or wage at a reduced amount. There is no legislative requirement that the loss of salary, wage or earnings be reduced to zero; section 108(2) [6] VEA only refers to any loss of salary or wages, or loss of earnings, not an actual amount.
In addition, self employed persons who are suffering a reduction in income, in the form of salary or wages, but no net reduction in business revenue or profit, may still be eligible for the allowance. And inversely, a business may have reduced revenue impacting on profits or even generating a loss as result of the veteran's or member's temporary incapacity. When seeking evidence of any loss of after tax salary or wages, or loss of revenue or earnings it is preferred, given the potential for complexity arising for self employed persons, to separate these two types of losses.
A loss of after tax salary or wages can be granted based on evidence of what the person has previously been paying themselves from the business, and given the capped maximum amount for LOE, this calculation is the preferred simple approach. Considerations to be taken into account when calculating business revenue or earnings reductions include: demonstrated impacts on business revenue or earnings as shown in BAS; evidence of additional wages costs to replace the self employed person; and demonstrated reduction in profits or losses as shown in BAS statements.
Information pertaining to business profit and loss may not be forthcoming in the short run and BAS statements may need to be viewed over a number of reporting periods to gain a clear understanding of the impact of a persons temporary incapacity on business revenue and profits or losses and not resulting from other business factors. When considering these calculations, it is also important to be mindful the LOE Allowance can only be paid up to a maximum of the rate equivalent to the Special Rate of disability pension excluding Clean Energy Supplement [7]. More information can be found on this topic under [glossary:Loss of Earnings Calculations for Self Employed Persons:] [8].
The energy supplement is a fortnightly or quarterly payment designed to help recipients meet the cost of electricity and gas bills.
When calculating earnings for self employed persons, assessors should take into account business income over a timeframe prior to and during the temporary incapacity period. For example, a new business may have significant start-up costs that result in an operating loss. In these circumstances, the assessor will need to consider the overall state of business maturity. This business is likely to be generating income, just not enough to make the business profitable in the short term.
If the veteran or member suffers a temporary incapacity from the treatment of his/her service related condition/s and the business has a drop in income, then the veteran or member is still eligible for the loss of earnings allowance.
In these cases, assessors should consider the earnings or gross income of a business prior to the period of incapacity compared to the income of the business after the period of incapacity to determine the amount of the loss of earnings. Investigation of the revenue of the business rather than the profit of the business should be undertaken.
In addition, if the veteran or member temporarily employs someone to take over the operation of the business, the business may not suffer a reduction in income but may have an increase in expenses. In addition, the veteran or member may no longer be able to draw a wage from the business. In this case, the person has suffered a loss of earnings.
In some circumstances, a self employed person may be able to demonstrate a loss of earnings but determining the actual amount of that loss could be problematic. It may be more beneficial to compare the loss to a wage or salary earner in the same field. Such comparisons would only be required if losses are less than the Special Rate of disability pension. The LOE Allowance for losses equal to or greater than the Special Rate of disability pension are capped at the maximum of the Special Rate of disability pension.
Delegates should also be mindful of seasonal work. A self employed person who is engaged in a business that deals with seasonal income may or may not suffer a loss of income. For example, a person operating a business as a fruit picker may only have income during the fruit picking season. For example, does the person usually start picking fruit in North Qld in August/September travelling through NSW in October/November and ending in Victoria or Tasmania in December to March? If they claim LOE for a period outside of the picking season, it is unlikely they have suffered a loss of earnings.
Delegates should use their discretion, treat each case on its merits and exercise due diligence in applying these guidelines. In cases of seasonal work consideration should be given to evidence of activities undertaken in previous seasons.
If the veteran or member is undergoing treatment for a war or defence caused injury or disease, they are eligible for the LOE Allowance as indicated in paragraph 108(2) (a) [6] of the VEA. Treatment within the meaning of this section can include passive measures such as a temporary cessation of work, or a period of rest and recuperation where recommended by the medical practitioner who is treating the veteran or member for the war or defence-caused injury or disease. Periods not at the recommendation of a medical practitioner are not eligible for the LOE Allowance.
LOE Allowances can be provided for, or in replacement of, sick leave provisions as a result of absences from the work place for reasons associated with treatment, awaiting supply or repair of prosthetics, surgical aids or appliances or claim investigation commitments (covered in detail at Background [13]) associated with a war or defence caused injury or disease. A veteran or member may organise leave without pay and receive the LOE Allowance for the period they are accessing eligible treatment, in effect 'preserving' their sick leave entitlements and replacing their leave with the LOE Allowance. These sick leave provisions provide a 'safety net' so veterans and members are not disadvantaged by the impacts of their accepted conditions. Leave entitlements are not 'gratuities' as described in subparagraph 108(8) (b)(iii) [6] VEA. Veterans or members should be made aware that, in circumstances where their income exceeds the Special Rate of disability pension, the LOE Allowance for sick leave provisions can only be paid at the maximum of a rate equivalent to the Special Rate of disability pension.
While the decision to apply for LOE Allowance to cover sick leave must be made by the person, if a veteran or member has used part or all of employer provided personal (sick) leave for a war or defence-caused disability, and subsequently, in that year, having no benefit to cover an absence for another non-accepted condition, needs to take more time off work, then he or she can then access the LOE Allowance for a period of time off work for a non-accepted condition, up to the time limit of sick leave accessed for accepted conditions in that year, as per subsection 108(5) [6] VEA.
For example, if the veteran or member has been required to take 2 weeks absence from work to receive treatment for a war caused disease, and used their employer provided personal (sick) leave to do so – they would be able to claim the LOE Allowance for 2 additional weeks for non- accepted conditions which have caused the person a loss of earnings.
When assessing eligibility for the LOE Allowance consideration should be given to other entitlements, particularly the [glossary:temporary special rate:DEF/Temporary Special Rate (TSR)] pension (known as the Totally and Temporarily Incapacitated (TTI [7]) pension). New guidelines on the assessment of [glossary:special rate:Def Special Rate (T&PI)] were updated 19 March 2013 and are now available in CLIK. These guidelines reflect the Commission policy adopted following the decision Repatriation Commission v Connell [2011] FCAFC 116 (Connell). For more information, see [glossary:CM6882 – Special Rate and Intermediate Rate of Pension.
A veteran or member may also be entitled to incapacity payments for conditions accepted under the SRCA:CSREF/CG/CM6882] [15] or MRCA [7].
Temporarily totally incapacitated rate of disability compensation payment (formerly known as disability pension) under section 25 of the VEA [16]. TTI is the colloquial name for temporary payment at the special rate of the disability compensation payment.
Military Rehabilitation and Compensation Act 2004
The LOE Allowance is provided under [glossary:section 108 of the VEA. Unlike the TSR:LEGIS/VEA/section 108] [18] pension, eligibility for the LOE Allowance is not dependent on a person's level of incapacity from accepted conditions or the number of hours they are able to undertake remunerative work.
This table outlines the key differences to be considered when determining whether or not a veteran or member is eligible for either the [glossary:TSR:DEF/Temporary Special Rate (TSR)] or LOE Allowance.
Temporary Special Rate |
Loss of Earnings Allowance |
|
Age |
There are no age requirements or limits. However, there are specific work history requirements for veterans aged 65 years and over. |
No age requirements/limits. |
Disability level |
Veteran is assessed at 70% incapacity or more due to accepted conditions. |
No minimum level of disability pension. |
Work capacity |
Veteran is temporarily incapable of undertaking remunerative work for more than 8 hours a week due to accepted conditions alone. |
No work capacity or work hours requirements. |
Work History |
Veteran is prevented from continuing their remunerative work due to their accepted conditions alone. If claiming at or over age 65, the veteran:
|
No work history or specific age requirements or limits. |
Loss |
Loss of salary, wages or earnings as the veteran is prevented from continuing their remunerative work due to accepted conditions alone. |
Loss of salary, wages, or earnings due to the veteran (being absent from work):
|
Duration |
Paid during the period incapacity is likely to continue based on medical evidence. If granted, is subject to review prior to expiration of the scheduled payment period. |
Paid for the period of actual lost salary, wages or earnings due to absence from work. |
Amount of Compensation |
Statutory rate regardless of actual amount of earnings. |
The lesser of:
|
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[4] https://clik.dva.gov.au/compensation-and-support-reference-library/commission-guidelines/cm7030-application-loss-earnings-allowance-provisions/eligibility-loss-earnings-allowance/amount-lost-earnings
[5] https://clik.dva.gov.au/user/login?destination=node/21520%23comment-form
[6] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[7] https://clik.dva.gov.au/%23
[8] https://clik.dva.gov.au/compensation-and-support-reference-library/commission-guidelines/cm7030-application-loss-earnings-allowance-provisions/eligibility-loss-earnings-allowance/loss-earnings-calculations-self-employed-persons
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[13] https://clik.dva.gov.au/compensation-and-support-reference-library/commission-guidelines/cm7030-application-loss-earnings-allowance-provisions/background
[14] https://clik.dva.gov.au/user/login?destination=node/21516%23comment-form
[15] clikpopup://DEF/SRCA
[16] http://clik.dva.gov.au/legislation-library
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[18] clikpopup://DEF/Temporary Special Rate (TSR)