Incapacity payments are essentially the difference between what a person would normally earn in a week, (called either Normal Weekly Earnings (NWE) under the SRCA or Normal Earnings (NE) under the MRCA) and the amount they are actually earning in a week following their injury.
Establishing a person’s NWE or NE forms the basis for all incapacity payment calculations and is intended to be a representation of what the person could normally have expected to earn but for the injury. A person’s NWE or NE is a notional amount.
NWE and NE is always based on earnings from the period of Australian Defence Force (ADF) employment during which the injury occurred. Subsequent earnings from employment undertaken after discharge from the ADF is not considered. The method to calculate NWE or NE differs between serving and discharged members and type of service giving rise to the injury.
Chapter 4 contains detail on each method of calculation. The different types of service (Permanent Forces (can be either full-time or part-time), Continuous Full-Time Service and Part-time Reserve) are discussed in 3.9. The type of service the injury arose from will need to be established prior to calculating NWE or NE.
NWE is determined by reference to Section 8 and 9. Section 8 [1] prescribes how the NWE is to be calculated and section 9 [1] determines the period of pre-injury employment (the 'relevant period') from which the NWE is to be averaged. NWE is based upon earnings at the date of injury, and not necessarily when incapacity for work first arises from the injury.
For a discharged member NWE will be taken to be the higher amount of earnings at:
date of injury; or
date of discharge from the ADF.
Periods of service that are the same type i.e. permanent forces or reserves are considered a single period of service. When a person has re-enlisted in the same service type and attains a higher rank and pay (and higher earnings) in a period of service after the period the injury arose from, NWE should be based on the higher amount of earnings at discharge.
If the person re-enlists and is discharged at a lower rank and pay, then NWE is based on the person’s earnings from the earlier period.
NE is determined by reference to subsection 89(3) and 132(2). Subsection 89(3) [2] prescribes the method to calculate normal earnings for current serving members and subsection 132(2 [3]) prescribes the method to calculate normal earnings and normal weekly hours for former serving members.
The term “former employee” under the SRCA refers to a certain group of people under section 123 [1] who were in receipt of incapacity payments on 1/12/88 (this is discussed in Chapter 9).
Section 5 of the MRCA defines a former member as “a person who has ceased to be a member” and notes that “A cadet or a part-time Reservist who is unlikely to be able to perform his or her duties in the future as a result of an incapacity might be taken to be a former member (see section 10).”
The simplest/most common example of a former member is person who has discharged from all forms of ADF service (including the Standby Reserve service). The person’s ADF service record will confirm this.
Under section 10 the Chief of the Defence Force (CDF) may advise the Commission in writing if the Reservist or cadet is unlikely to be able to perform their duties in the future as a result of his or her incapacity. If a determination is made by the CDF under section 10 then the person is taken to have ceased to be a member for the purposes of the MRCA. This does not imply that person has been discharged from the ADF as the ADF still retain the ability to recall the member to active service.
A person for whom a section 10 determination has been made, should not be referred to as being discharged from the ADF. Instead this person is ‘being taken to have ceased to be a member for the purposes of the MRCA’.
Being a former member or being taken to have ceased to be a member for the purposes of the MRCA has the following effect:
DVA becomes the person’s rehabilitation authority, rather than the Chief of the Defence Force.This generally entails a broader range of rehabilitation services, including whole of person psychosocial rehabilitation, than is provided by Defence.
Incapacity payments are calculated and paid under Part 4 of Chapter 4 of the MRCA for former members, as distinct from Part 3 of Chapter 4 of the MRCA which relates to current members. The implications of which are:
These minimum and maximum compensation provisions are applicable only after the first 45 weeks of incapacity payments. Chapter 7 discusses 45 weeks/maximum rate compensation weeks.
Where a person’s rate of compensation for incapacity is less than a prescribed minimum amount, as defined in subsection 19(7) [1], the amount is increased to the minimum earnings rate (subsection 19(6) [1]) with additional amounts payable for prescribed dependents. The minimum earnings provisions are applicable only if the client is not engaged in actual employment during the week.
Chapter 4 contains detail on the minimum earnings provisions.
Where a person’s rate of compensation for incapacity is greater than 1.5 times the Average Weekly Ordinary Time Earnings of Full-time Adults (AWOTEFA), the amount of compensation is reduced to the AWOTEFA rate.
Note - the AWOTEFA rates change every February and August. These rates can be found under the Statutory Rates page in CLIK.
Where a person's normal earnings are less than the national minimum wage, section 179 [4] prescribes the national minimum wage as the default NE for that person. This rate can be found under the Statutory Rates page in CLIK.
There is no maximum rate set for NE.
3.3.2.1 Example 1- Increasing earnings to the national minimum wageA Reservist has ADF earnings of $90 per week for one-day's Reserve employment, and civilian earnings of $400 per week (for 20 hours as a part-time console operator), their NE would be equal to $490 per week. Section 179 [5] dictates that this person's NE should then be increased to the national minimum wage. |
The following amounts are excluded from NWE/NE:
bonuses earned by the person (including retention bonuses); and
expected increases in earnings due to the reasonable expectation of a bonus, promotion or posting.
Bonuses earned by the person are also excluded from actual earnings.
These exclusions are explicitly outlined in section 180 [6] of the MRCA and are omitted from section 8 of the SRCA (i.e. do not fall within the terms of section 8 [1] and cannot be included).
A retention bonus is a one-off lump-sum payment rather than a payment of salary or wages and is excluded from NWE/NE. Examples of a retention bonus are:
Pilot Retention Bonus Scheme established in 1996 and involving a one-off payment of up to $120,000 to suitably qualified personnel in return for a five year commitment to serve, and
Submariners Completion Bonus Scheme established in 1999 and involving a one-off payment of $35,000 to suitably qualified personnel in return for 2 years effective Collins Class Service.
Military Superannuation and benefits Scheme retention benefit was established in 1991 and provides a one-off payment to eligible personnel who, on completion of 15 years' service, undertake to complete a further five years' service. The benefit is a lump sum of one year's salary which is paid directly to the individual at the time he or she commits to the additional service and is taxed as assessable income. The retention benefit is not considered superannuation and is not reduced from incapacity payments.
Members injured while undergoing promotion courses or ADF employment and skills training (and are prevented by injury from completing the course) should not have their NWE/NE set at the level of the anticipated promotion. Promotion after such courses is dependent on the standard of performance during the course, assessment or recommendation on its completion and a position actually being available. NWE/NE cannot be increased in line with an expected promotion.
The only exceptions involve progression through pay grades and a promotion/ classification change at the completion of initial training, a condition of service which applies only to ADF recruits, officer cadets etc. (see section 3.5.4 for further discussion).
NWE and NE should be adjusted in line with incremental pay advances that the person actually received, or would have received if not for their discharge. This is covered by subsection 8(6) [1] of the SRCA and section 185 [7] of the MRCA. Prior policy indicated that time-based increments were only applicable to serving members or medically discharged former members. Increments should now be applied to all cases (regardless of discharge type). Cases that have not had increments applied should be adjusted as they are identified (i.e. via a review).
An ‘increment’ means an automatic or periodic increase in payment on the basis of age, length or continuity of service. In the context of ADF pay scales it is an advance in pay within a pay group. Advancement between pay groups is generally subject to training and assessment of satisfactory performance. Individuals do not ordinarily move through those pay groups automatically (with the exception of recruits, officer cadets etc).
Increments in respect of a serving Reservist's civilian employment are applied as they would have been attained so long as the person is still serving in the Reserves.
Information on when an increment would have been attained should be obtained from Defence via DVA SAM.
Subsection 8(10)(b) allows a person's NWE to be reduced to ensure they do not receive more compensation than they would have received if they were not injured. Section 8(10)(b) is utilised when applying time-based increments and post 2001, indexation increases under 8(9)(B). For example; if a person discharges before reaching the top increment for their rank, NWE is 'set' at rank and pay level at date of discharge as advised by Defence. Increments are applied as they would have been attained, according to the military pay scale in effect at the time the increment is due. WPI indexation is applied annually on 1 July, however, where the combination of increment and WPI increase results in the person being paid more than they would have had they not been injured, Section 8(10)(b) requires the NWE is to be reduced by the excess amount.
NWE and NE should be adjusted in line with pay increases due to actual ADF promotions up until the date of discharge. This is covered by subsection 8(7) [1] of the SRCA and section 186 [8] of the MRCA and is applicable to both Permanent Forces and Reserve members. A person must actually be promoted in order to receive the increase to NWE/NE.
In the case of a SRCA Reservist, adjustment of NWE for promotion will include promotion in the member's civilian employment but only so long as the member is still serving in the Reserve Force at the time of the civilian promotion.
If a person is injured in Permanent Forces service but transitions to Reserve service and subsequently receives incapacity payments as a result of the injury arising from their Permanent Forces service, only those promotions earned while a Permanent Forces member can be included in NWE/NE (i.e. no promotions earned in Reserve service can be applied to the calculation of NWE/NE).
If the same person receives incapacity payments as a result of an injury arising from their Reserve service, any promotions earned while in that Reserve service can be applied to the calculation of NWE/NE.
The person may also transfer from Reserve service to Permanent Forces, if the person was injured in Reserve service, only the promotions received while in that Reserve service can be applied to the calculation of NWE/NE.
NWE should be increased in line with increases to salary or allowances resulting from a change to the relevant award/determination/industrial agreement etc. This means the ADF component of NWE is increased in line with military pay rises for serving members. The civilian component of NWE (where applicable) should also be increased in line with current pay rates.
The military pay scale relevant to a serving member is the pay scale current during the period of incapacity.
Subsection 8(10)(a) [1] allows a person’s NWE to be reduced to ensure a person does not receive more compensation then they would have received if they were not injured. For example if a person’s actual salary is reduced due to a reason other than their accepted injury (i.e. a voluntary change in position due to personal reasons), their NWE should also be adjusted in line with the reduction.
With effect 30 November 1995, an ADF pay restructure occurred which resulted in changes from pay levels to pay groups. If a person is discharged prior to 30 November 1995, their rank and pay is adjusted on this date to align with the new pay groups. This change did not result in a reduction to a person’s pay. The Defence Determination is available here [9].
There are certain ranks and pay levels which this change did not affect but in general terms the following changes occurred with effect 30 November 1995:
Column 1. Former Pay Level | Column 2. Pay Group |
1 | 1 |
2 | 1 |
3 | 2 |
4 | 3 |
5 | 4 |
6 | 5 |
7 | 6 |
If a person discharged prior to 30 November 1995 and has claimed compensation for a period after 30 November 1995, their equivalent rank and pay group immediately prior to the 30 November 1995 pay restructure must be established (via Defence). It is not required that a request is made to Defence for the post-1995 rank and pay information as this can be established using the Defence Determination (available via link above).
Prior to 1 October 2001, NWE was increased as per a serving member i.e. in line with military pay rises. Delegates must apply this method when paying a period of incapacity prior to October 2001.
The military pay scale relevant to a discharged member is the pay scale current at discharge.
The SRCA was amended on 1 October 2001 to provide for a new method of calculating NWE for discharged employees (the method for serving members did not change).
Subsection 8(9)(B) [1] provides for the NWE of a discharged member to be increased annually on 1 July by reference to a statutory indexation rate, the Wage Price Index (WPI). After 1 October 2001 NWE is no longer changed in line military pay rises, instead a percentage increase is applied.
The military pay scale relevant to a discharged member is the military pay scale current on 1 October 2001 i.e. the ADF pay rate decision of 1 March 2001. This is then updated annually by the indexation rate commencing 1 July 2002.
The WPI indexation amount is applied in full on each payment date, i.e. it is NOT paid on a pro-rata basis where the member has been discharged for less than a full year.
Where the combination of increment and WPI increase results in the person being paid more than they would have had they not been injured, Section 8(10)(b) requires the NWE is to be reduced by the excess amount.
3.5.3.2Example 1 – Increasing NWE for a discharged memberA person is claiming incapacity payments for a period in 2016. The person was discharged on 1/1/1995 as a Private pay level 2. At that time their ADF salary was $1072.86 per week (as per the pay rates from 15/12/1994). At 30 November 1995, the person’s pay level 2 is converted to the new pay group 1. Prior to 1/10/01 the person’s ADF salary continues to be adjusted in line with ADF pay rises and as at 1/3/01 the person’s ADF salary as a PTE 1 is $1316.76. After 1/10/01 the person’s ADF salary is adjusted in line with the WPI. For Reservists, once the person has discharged from the ADF the civilian component of NWE as well as the Reserve component can only be increased by the WPI, even where the person continues in civilian employment. The WPI rate is published by the Australian Bureau of Statistics' and can be found in CLIK [10]. |
The ADF component of NE should be adjusted in line with increases to military pay. This is covered by section 185 [7] of the MRCA.
The civilian component of NE (where applicable) should be adjusted annually from 1 July by reference to the Wage Price Index (WPI) to 31 December of the previous year. This rate is published by the Australian Bureau of Statistics and can be found in CLIK. This is covered by section 182 [11]of the MRCA.
Where NE is based on full-time ADF pay and allowances, a remuneration loading is included in NE to compensate for the loss of non-salary benefits a person received whilst serving in the ADF (specified in the legislation as $100 originally). The remuneration amount is increased annually on 1 July by reference to the percentage increase in the ADF Workplace Remuneration Arrangements at 31 December of the previous year (section 183 [12]).
If a person is injured during their initial training NE/NWE is established at the rank and pay level (plus allowances) they would have attained upon completion of that training, from the date they would normally have completed the training. This applies to recruits, officer cadets, apprentices and other trainees. This policy is applicable regardless of the method of discharge of the person from the ADF.
Note that this only applies to those members whose normal earnings in the ADF are at the trainee level prior to adjustment. For example a member who has completed initial training in other ranks and who is then injured whilst undergoing initial officer training i.e. a Private who undertakes Officer Cadet Training has their salary maintained at their existing rank and pay group during the training period, NWE/NE is then set at that amount with no further progression applied.
Increments that are normally payable as the person progresses through their training are also payable at that same date. NE/NWE continues to be based on that initial level of appointment with no further promotions applied (i.e. those dependent upon successful further training).
The following information is required from Defence:
In some circumstances Defence may be unable or unwilling to provide a response on which pay group the person would have attained if they had completed their training i.e. where a recruit is discharged prior to being assigned a specific billet, corps or mustering. In these cases where there has been genuine yet unsuccessful attempts to establish the appropriate pay group, that person's NWE/NE may be progressed to a Private Pay Group 3 or equivalent (for a recruit) or a Lieutenant Pay Group 2 for an officer cadet who was studying at the Australian Defence Force Academy (ADFA). Typically a person studying at the Royal Military College (Duntroon) is progressed to a Lieutenant Pay Group 2. The duration of initial employment training for a recruit should be deemed to be 6 months.
This is covered specifically in Section 189 [13] of the MRCA and captured generally by section 8 [14] of the SRCA.
3.1.4.1 Example 1 – Calculating NWE/NE for a recruitAn Army recruit injured during week 2 of basic training and medically discharged 3 months later, without being assigned to a specific corps (and Defence have been unable to advise on the person’s expected pay group if they had completed training), NWE/NE is calculated as follows: 1. Private recruit for 80 days from the date of enlistment; 2. Private Trainee for 6 months from the date of their ‘march out’ from the Army Recruit Training Centre; 3. Private Pay Group 3 thereafter (adjusted for increments). Note - In this example the recruit continued to be employed in the Army for 3 months post injury and paid as a Private recruit. Therefore the recruit will have actual earnings equivalent to a Private recruit for that 3 months. |
Section 187 [15] of the MRCA provides that when a category of defence work on which a person's NE is based on is abolished, the delegate must determine which of the current categories should be used to determine NE.
Similarly, under section 188 [16], when an allowance ceases to exist before the cessation date that had been advised by Defence, the delegate must determine which of the current allowances (if any) the person would have been paid instead and use this in determining NE. The same cessation date is used.
Serving | Discharged | |||
Type of allowance | DRCA | MRCA | DRCA | MRCA |
Qualification and skills based allowances i.e. clearance diving, SFDA | As advised by Chief of Defence Force.
| As advised by Chief of Defence Force.
Only pay-related allowances can be compensated.
| Indefinitely.
| As advised by Chief of Defence Force.
Only pay-related allowances can be compensated.
|
Compensation for hardship based allowances i.e. deployment, field | As advised by Chief of Defence Force.
| As advised by Chief of Defence Force.
Only pay-related allowances can be compensated.
| As advised by Chief of Defence Force.
| As advised by Chief of Defence Force.
Only pay-related allowances can be compensated.
|
The calculation of Normal Weekly Earnings/Normal Earnings includes a component to compensate for allowances that form part of the earnings the person has lost due to injury.
In order for an allowance to be compensated, the person must have been actually receiving it prior to the injury (with the exception of those injured in initial training). The allowance must also be taxable.
The following should not be included in the calculation of NWE/NE:
Example – Allowance a person is not yet receiving
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). N(W)E must be based on the pay and allowances they were receiving prior to the onset of their injury.
The following table provides a guide but is not exhaustive;
Included in NWE/NE | Excluded from NWE/NE |
---|---|
First Aid Allowance | Annual Leave Bonus |
Higher Duties Allowance | Meal Allowance |
Leading Hand/Supervisor Allowance | Travel Allowance* |
Proficiency Allowances (tickets) | Tropical Clothing Allowance |
Shift Allowances | Uniform Maintenance Allowance** |
*Only if the allowance is to compensate for money spent i.e. meals, hotel etc. rather than it being a component of wages (taxable). If required delegates should confirm this with the employer.
**For periods prior to 13 May, 2021
The ADF salary structure allows for payment of Service Allowance, in addition to the basic salary, to members of the permanent force who are holding certain ranks. As a result of the ADF Employment Offer Modernisation Program, the Defence Force Remuneration Tribunal have determined that Service, Reserve, Trainee and Uniform Allowances are ‘rolled into’ members’ salary, to establish ‘Military Salary’ with effect from 13 May, 2021.
For periods prior to 13 May, 2021, where Service Allowance is payable, it should be incorporated into the member/ex-member's NWE/NE.
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.
A member of the ADF deployed on warlike or non-warlike service generally receives three separate pay-related allowances:
These allowances have been determined as pay-related allowances. When a member is medically evacuated back to Australia due to a service related injury or disease, they may become entitled to compensation for loss of deployment allowances.
The duration for payment of these allowances varies and is summarised below.
Allowance | Service Type | Duration of allowance |
Deployment/International Campaign | Warlike | duration of the deployment plus for the period of any accrued war service and recreation leave whilst on deployment |
Deployment | Non warlike | duration of the deployment plus for the period of any accrued war service and recreation leave whilst on deployment |
Field |
| ceases when the member leaves the field |
Separation |
| ceases upon the member's return to Australia |
War service leave is an additional leave benefit for a member who is on warlike service. A member on non-warlike service may also accrue additional recreational leave. When a member is returned from deployment early due to an accepted condition and suffers a loss of allowances they would have received for those accrued War Service/recreation leave days, those allowances can be compensated. However, there is no provision to compensate a person for the leave days not accrued.
Pay-related allowances are those allowances determined by the Defence Minister for the purposes of the MRCA. The DRCA 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.
A salary non-reduction allowance is a pay-related allowance. The salary non-reduction allowance should be treated as any other pay-related allowance i.e. delegates will need to establish in each case (via the Request Management System (RMS)) when the allowance would have been adjusted and when it would cease. Further information around when non-reduction allowances would be adjusted and the period for which they are usually payable, can be found at: Defence Pay and Conditions - Division 5 Salary non-reduction provisions.
A member may receive a pay-related allowance as a lump-sum (i.e. annualised) - for example, Language Allowance is paid annually as a lump sum. As with all pay-related allowances, delegates need to confirm with Defence the date to which the allowance would be payable if not for the incapacity.
Language allowance is a proficiency-based allowance payable for a set period, after which members are required to 're-qualify' to continue receiving the allowance. Where a member who has received an annual Language Allowance discharges from ADF service within the period, the allowance may be included in NE until the date advised by Defence.
Where an annualised allowance is payable, delegates can convert the lump sum to a weekly amount to inlcude in NE.
NWE is calculated in accordance with section 8 [3]. 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 DRCA 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 [3] 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.
Subsection 8(10)(a) [3] 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 via the RMS.
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):
Example 1 – including allowances for a person who is still serving 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. |
In accordance with the FFCA decision in Comcare v Simmons 2014 subsection 8(10)(b) [3] 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:
Delegates should establish whether a person’s NWE (that includes allowances the person was receiving) 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.
The Comcare Scheme guidance - calculating normal weekly earnings [2] provides detail on establishing NWE and the inclusion of allowances in NWE. Delegates need to be satisfied that the allowance included would still be payable to the person in the week incapacity payments are payable.
The basis on which an allowance was paid will establish how long it is included in calculations of NWE for a discharged member. Allowances paid on the basis that the person has specific skills should continue to be included in NWE calculations indefinitely, 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.
An allowance that is paid only on the basis of particular employment conditions (with no skills based component) is only compensable 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.
Similarly, Higher Duties Allowance (HDA) is only compensable while certain factors exist - i.e. being in a certain location or someone else being on leave. If a person was in receipt of HDA at date of injury or date of discharge, the allowance would only be included in NWE for the period as advised by Defence.
The date allowances would have ceased should be confirmed by Defence via the RMS.
The following website can be used to confirm an allowance has a skills based component: http://www.defence.gov.au/PayAndConditions/ADF/Cha... [17]]
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.
Example 1 – Comparison of NWE at date of injury and date of discharge 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: 1. Deployment Allowance or International Campaign Allowance; 2. Field Allowance; and 3. 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). |
The formula for calculating NE includes a component to compensate a person for the allowances they would have been paid if not for their incapacity. Subsection 91(3) [7] states the person’s ‘normal pay-related allowances’ are those “that would have been paid to the member for the week if the member were not incapacitated for service”.
Subsection 91(4) [7] states that “the Chief of the Defence Force must advise the Commission in writing of the date on which each compensable pay-related allowance would normally have ceased to be paid to the member if the member were not incapacitated for service.”
All requests for advice on when an allowance would have ceased if not for the incapacity must continue to be directed through the RMS in the first instance. The cessation date provided by the RMS is the default date and there is a presumption that it is correct. The claimant should not be provided with the option of providing an alternative date.
However, in the event the person disagrees with the allowance cessation date provided by Defence, and provides evidence of an alternative date specific to their service, the delegate must assess the evidence and make a decision accordingly. There is no expectation the delegate investigate beyond the evidence provided by the claimant.
Acceptable evidence may include one or more of the following;
The information should provide details specific to the members service, such as the likelihood of the member continuing in a given role etc, were it not for their injury/medical discharge.
Note: a statutory declaration from the member is not considered suitable evidence.
Example scenario:
A former Navy clearance diver disagreed with the cessation date for Clearance Diver Allowance (CDA) obtained from Defence, via the RMS. The member provided a letter from the Commanding Officer of the Unit stating it was expected that but for their service-related injury, the member would have continued to be posted to an operational unit, and would have received the corresponding allowance.
Section 11 [8] of the MRCA prescribes that the Minister for Defence must determine which allowances are pay-related allowances under section 58B or 58H of the Defence Act 1903. Only pay-related allowances can be included in the calculation of NE.
The person must also have been in receipt of the allowance immediately prior to the onset of incapacity (paragraph 91(5)(a)) [7] for the allowance to be compensable. For example, a member who is injured whilst undertaking pre-deployment training and who cannot subsequently deploy because of that injury, cannot be compensated with lost deployment allowances.
Additionally, the pay-related allowance must have been:
Example 1 – Allowances for a person injured in initial training A serving member who is injured whilst undertaking their initial corps-related training can be compensated for any corps-related allowances they would have received upon completion of that training because the corps-related training was part of the member's initial employment training. Example 2 – Allowances for a person transferring corp A member who is attempting to transfer from one corps to another (e.g. infantry corps to special services), and is injured during the corps training cannot be compensated for pay and allowances they would have received upon completion of that training. Any compensation must be based on the pay and allowances they were receiving prior to the onset of their incapacity. |
Skills-based allowances such as Special Forces Disability Allowance (SFDA) and Flying Allowance, can be included in the calculation of NE immediately following discharge, and prior to advice from the CDF on an end date of that allowance where:
The standard procedures for requesting advice on allowances through the RMS should be followed, including procedures for escalating outstanding requests.
In cases where an overpayment has occurred, standard overpayment recovery procedures apply.
Hardship allowances (i.e. an allowance for being in a certain location) are not to be included immediately. Delegates should wait for confirmation from the CDF on receipt and duration of payment prior to compensating a person for that loss.
A person’s method of discharge does not affect whether allowances are included in NE. It is up to the Chief of the Defence Force (CDF) to advise DVA on what date any pay-related allowance would have ceased if not for the incapacity. In the case of a voluntary discharge, allowances are not lost as a result of the injury, rather as a result of the individual’s decision to leave the ADF. However, a decision cannot be made on that basis alone and instead a request must be made via the RMS in order to establish the date the allowance would have ceased if not for the incapacity (common sense would imply that the date advised by the CDF will be the same date as the date of the person’s discharge). However, if the CDF advises a date other than the discharge date then we must use that date.
Clients with 'dual discharges' (e.g. discharged administratively for disciplinary reasons and J5 medical classification) are eligible to receive incapacity payments. Administrative discharges do not invalidate a J5 determination, and can be applied in addition to a medical discharge. Therefore, for incapacity purposes, dual discharges are the same as a medical discharge provided that one of the accepted conditions is the reason for the J5 determination and the medical discharge on the MECRB minutes. Clients in this situation may be eligible to have pay-related allowances included in calculation of NE, depending on the advice from CDF.
Example 1- Allowances included in NE for duration of posting A serving member who is parachute-qualified and posted to a parachuting unit will receive paratrooper allowance. For example, a member of 3 RAR is injured whilst participating in a parachute jump. The injury prevents the member from ever being able to parachute again. Accordingly the member is compensated for this loss by having the allowance included in their NE for the duration of the posting to 3 RAR. At a later date the member is posted to a non-parachuting unit (for a reason unrelated to their injury) where they would not have received parachuting allowance irrespective of their injury. Accordingly parachuting allowance is not included in their NE for the duration of this subsequent posting. However during this time the member's incapacity for parachuting duties has not changed in that they remain incapacitated for any parachuting. Later on the member is posted to the SASR, where they would receive parachuting allowance if they were able to parachute, however they are unable to qualify for the parachute allowance because of their original injury. The fact that they were not receiving the allowance immediately prior to being posted to the SASR was only due to them being posted to a unit which did not require them to undertake parachute duties. However the member was in receipt of the parachuting allowance immediately prior to their initial incapacity at 3 RAR and accordingly is entitled to have parachuting allowance included in their NE. Crucial to this case is the fact that the member was in receipt of parachute allowance prior to first becoming incapacitated when they were posted to 3 RAR, and the member's incapacity for parachuting duties has been ongoing since that time. The fact that the member has not been able to maintain their parachuting qualification, of completing two jumps per annum, is only because of their ongoing incapacity. When the member eventually discharges the member will only be compensated for lost parachuting allowance for as long as Defence advises the allowance would have been payable if not for their injury (i.e. until the end of the posting). |
Historically, allowances were comprised of two distinct elements:
The Qualification and Skill component acknowledged the level of additional skills required in a role and the Disability component acknowledged the disabilities associated with certain environments.
As a result of the Australian Defence Force (ADF) Remuneration Reform Project, the Qualification and Skill component of most corps-related allowances were rolled into salary with effect from 9 August 2007 (along with streamlining the pay structure). Accordingly most corps-related allowances now only consist of a disability component, this includes the Special Forces Disability Allowance (SFDA) formerly the Special Action Forces Allowance (SAFA).
The qualification and skill component of an allowance should be included in NWE/NE calculations indefinitely and the disability component included for only so long as it would have been received.
The DRCA policy in relation to allowances was revised in line with the outcome of Comcare v Simmons [2014] FCAFC4 (Simmons) [1].
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 cases of Kennedy and Military Rehabilitation and Compensation Commission [2007] AATA 19 (15 January 2007) [4] and Hillman and Military Rehabilitation and Compensation Commission [2011] AATA (28 January 2011) [5] were used to guide policy on the inclusion of SFDA in NWE prior to Simmons on 13 February 2014 i.e. paid depending on the individual circumstances of the case and advice from Defence on when the allowance would have ceased if not for the injury.
The revised policy is based on the Comcare Scheme guidance - Calculating normal weekly earnings [2].
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 Appeals and Reconsiderations section.
Every effort is made to keep the list below up to date, however, if an allowance is not included, delegates can check the determinations on which allowances are pay-related allowances via the following links: https://www.defence.gov.au/PayAndConditions/ADF/Ch... [18]
The following have been determined as pay-related allowances:
Allowances from 1 July 2004
Allowance from 2 December 2004
Allowances from 31 May 2005
Allowance from 1 September 2005
Allowance From 20 February 2006
Allowance from 9 March 2006
Allowance from 20 April 2006
Allowance from 12 June 2006
Allowance from 1 September 2006
Allowance from 6 November 2006
Allowance from 13 December 2007
Allowance from 4 June 2008
Allowance from 1 July 2008
Allowance from 8 January 2009
Allowance from 12 September 2013
Allowance from 30 January 2014
NWE/NE is calculated with reference to a relevant period (SRCA) or the example period (MRCA). This period is usually the latest 2 week period before the date of injury (SRCA) or the date of incapacity (MRCA) though there is discretion to determine a different period that more fairly represents the person’s normal weekly earnings i.e. a different length of period or a different period in time.
The 'relevant period' is a phrase defined by Subsection 4(1) to be 'the period calculated under Section 9'. Section 9 [1] makes reference to ‘to the latest period of 2 weeks before the date of the injury during which the employee was continuously employed by the Commonwealth or a licensed corporation’ i.e. the 2 week period prior to the injury. Subsection 9(2) – 9(4) provide for variations in pay within the 2 week period:
Subsection 8(4) [1] allows that where a 'relevant period' is of insufficient duration to produce a meaningful NWE in a particular case, a delegate may establish NWE by reference to the employer's generic pay scales, i.e. the normal weekly earnings of other employees 'performing comparable work'. This method should also take account of the average level of allowance paid to similarly employed persons of that classification/rank.
Subsection 8(5) [1] allows the delegate to calculate the NWE in accordance with whatever period is considered 'reasonable' i.e. a change in the duration of the period or a different period. For example if a person was (uncharacteristically) unemployed during the relevant period or was unusually busy, i.e. while generally unemployed was as an exception engaged in seasonal work (e.g. fruit picking) during that period. Where an injured employee is a shift worker the relevant period could be extended to cover the full range of shift rotations. This gives a more accurate reflection of the person’s NWE.
There is no single definition for the ‘example period’ instead it is defined within each applicable division of the MRCA (part 3 and 4 of chapter 4) depending on whether the person is serving and the service giving rise to their injury. Each separate definition for the example period allows choosing a different period in time or adjusting the length of the period to ensure the amount calculated as NE fairly represents the person’s earnings before the onset of incapacity.
NWE is not calculated for those periods of incapacity predating 1 December 1988.
Incapacity payments under the 1971 Act [19] and the 1930 Act [20] did not utilise the NWE concept as a basis for payment. Weekly compensation for incapacity to work was – during the currency of these Acts – made on the basis of published statutory rates, including additional specified amounts in respect of dependants, varied annually.
Section 25 of the 1971 Act does provide for an amount titled 'Average Weekly Earnings' (AWE) to be calculated using a period of unspecified length taken from immediately before the injury and not earlier than 12 months prior to it. However, the function is quite different to that of NWE. The AWE represents a maximum payment – i.e. a ceiling – for incapacity benefits. As such, it is/was not required to be calculated in every case where a client was incapacitated.
Information on calculating incapacity payments under the 1971 or 1930 Act can be found in chapter 12.
NWE for periods of incapacity occurring under the SRCA although arising from old Act injuries, is calculated in the same way as NWE for a post-88 injury.
Subsections 124(1A) and (2) [1] of the SRCA provides that compensation is payable under the SRCA for an injury occurring under the earlier Acts, providing only that compensation would also have been payable under the 1971 Act or the 1930 Act, had those Acts not been repealed. A period of incapacity arising under the SRCA is to be paid in the manner specified under the SRCA (i.e. calculated by reference to S19, 20, 21, etc.) even though the injury responsible for that incapacity originated under an earlier Act.
This means that the delegate must determine an NWE in those cases in accordance with the policy discussed earlier in this chapter. That NWE will usually be the rank/pay level at the date of discharge, however in some circumstances it may be rank/pay level at date of injury. Paragraph 8(10)(b) [1] requires that NWE be determined as the higher of pre-injury earnings or pre-discharge earnings.
Subsection 124(7) [1] of the SRCA requires such pre-88 periods to be paid at the rates current when the incapacity occurred i.e. as if the old Act had not been repealed.
In cases where a delegate is retrospectively paying incapacity benefits in respect of a period of incapacity which occurred before the commencement of the SRCA Section 124(7) applies. This section requires the payment to be calculated by the method in force at the time of the period of incapacity.
This means that for periods of incapacity occurring before 1 December 1988, delegates should not determine NWE but pay compensation in accordance with the statutory rates current at that time (Chapter 12).
When the client is a 'Former Employee' within the meaning of section 123 [1] of the SRCA. i.e. the client was actually in receipt of incapacity payments on 1 December 1988 (the SRCA's commencing day) special provisions apply as per chapter 13.
Service type is no longer defined as either full-time or part-time, rather a person is either a member of the Permanent Forces or the Reserve Forces and may undertake that service on a part-time or full-time basis. The ADF now works under a ‘Total Workforce System’ (TWS) that encompasses a range of service categories that allow flexible working hours for all members. The TWS introduced the Service Spectrum (shown below) and Service Categories (SERCAT). Within the Service Spectrum, the SERCAT define an ADF member's service status and also includes three Service Option (SERVOPs). A SERVOP does not alter a members existing SERCAT however, it may modify some characteristics of their SERCAT. A SERVOP can only be used in conjunction with a SERCAT, while a single SERVOP may be applicable to more than one SERCAT.
Permanent Forces (PF) members are those typically enlisted in the ADF on a full-time basis (distinct from those in Reserve service on a full-time basis). A PF member may also render part-time service through the provision of a flexible service arrangement. The period or pattern of service through a flexible service arrangement may vary depending on the needs of the service and the member. The person may also be engaged in civilian employment as well as ADF service via a formal arrangement with Defence and the civilian employer.
Reserve employment is typically part-time employment in the Army Reserve, the Naval Reserve or the Air Force Reserve. In some cases, a Reservist may be engaged in military activities on a full-time basis, e.g. during call-up under the Defence Act, as a volunteer for operational or peacekeeping service or after accepting a (temporary) contract of full-time ADF service for a limited period in a specialist position.
Cadets, although part-time, are NOT members of the Reserves.
Annual camps, multi-day training courses and other limited periods of 24-hr-per-day attendance which are not associated with either operational 'call-up' or a formal contract of full-time ADF service, are considered as ordinary part-time reserves service.
The incapacity compensation payable to a Reservist depends on the type of Reserve service (ordinary part-time or Continuous Full-Time Service) he or she was performing at the time of the injury.
Continuous full-time service (CFTS) relates to ADF employment during call-up of the reservist under the Defence Act for operational service or, alternatively, voluntary acceptance by the reservist of a formal contract of full-time service (i.e. usually for a defined period). CFTS does not mean the period of a Reserves annual training camp or promotion courses or trade/skills courses incidental to part-time Reserves service.
The former Ready Reserve was an element of the active Army Reserve, where members enlisted under specific conditions of service (including some unique benefits) and initially underwent 12 months continuous full-time service, followed by obligatory part-time service (i.e. at least 50 days per year) for a further 6 years. The Ready Reserve was instituted in January 1992 and ceased on 9 February 1997.
Existing members of the Ready Reserve at that date transferred to the General Army Reserve.
Incapacity arising from injuries inflicted during the full-time component of Ready Reserves employment is to be paid as if the client was a member of the permanent force (i.e. NWE based on military salary only).
Incapacity arising from injuries inflicted during the part-time component of Ready Reserves employment are to be compensated as if the client was an ordinary part-time reservist (i.e. the NWE is to contain both civilian and reserves earnings).
Given the relatively short period during which the Ready Reserve was in operation (and thus, the relatively low number of ex-members) it is expected that associated claims for subsequent (delayed) incapacity for injuries received in such service, are likely to remain rare.
The Gap Year programme is open to people up to 24 years of age, for an enlistment period of 12 months full-time service (January to December). Subsequent periods of service in the Permanent Forces or Reserve service may be offered depending on ADF requirements and the person's suitability for further service.
Entitlement to incapacity payments arising from a condition/s sustained during Gap Year service is calculated as if the person was a member of the permanent force (i.e. NE is based on military salary + allowances).
Career progression for those undergoing initial training may also apply.
Links
[1] https://www.legislation.gov.au/Details/C2016C00843
[2] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324703
[3] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324777
[4] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324852
[5] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-mrca
[6] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324853
[7] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324859
[8] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324860
[9] http://www.defence.gov.au/payandconditions/adf/Determinations/docs/1995/58H_1995_27.pdf
[10] https://clik.dva.gov.au/military-compensation-srca-manuals-and-resources-library/incapacity-handbook/ch-31-normal-weekly-earnings-nwe/313-adjustments-nwe-after-injury/3131-indexation-nwe-discharged-clients-nature-wage-price-index-wpi
[11] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324855
[12] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324856
[13] http://www.austlii.edu.au/au/legis/cth/consol_act/mraca2004397/s189.html
[14] http://www.austlii.edu.au/au/legis/cth/consol_act/sraca1988368/s8.html
[15] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324861
[16] https://www.legislation.gov.au/Details/C2017C00134/Html/Text#_Toc479324862
[17] http://www.defence.gov.au/PayAndConditions/ADF/Chapter-4/Part-2/Part-C-Div-2.asp [6
[18] https://www.defence.gov.au/PayAndConditions/ADF/Chapter-4/Part-2/default.asp [11]
[19] https://www.legislation.gov.au/Details/C2004C02984
[20] https://www.legislation.gov.au/Details/C1930A00024