Jurisdiction: Merit Review
Catchwords: Pre-accident weekly earnings – PAWE – weekly payments – statutory benefits – self employed – calculation of gross earnings
Legislation cited: Motor Accident Injuries Act 2017 (NSW) ss Schedule 1 clause 4
- AAB - claimant
- CIC Allianz Insurance LTD - insurer
Disclaimer: This decision has been edited to remove Unique Personal Identification information including the name of the Claimant.
Merit Review Certificate
Issued under section 7.13(4) of the Motor Accident Injuries Act 2017
|The Reviewable Decision|
|Decision Maker||Sophie Lycakis|
|Date of Decision||7 March 2018|
|Nature of Decision||The amount of pre-accident weekly earnings|
|The Merit Review|
|Merit Reviewer||Clarence Brown|
|Date of this Certificate||15 June 2018|
The reviewable decision is affirmed. AAB’s pre-accident weekly earnings remain at $971.04.
Dispute Resolution Service Merit Reviewer
1. AAB is a self-employed cleaner in a franchise arrangement with FSG. He was injured in a motor vehicle accident on 10 December 2017. The insurer accepted his claim for weekly payments of statutory benefits under the Motor Accident Injuries Act 2017 (‘the Act’).
2. This dispute is about the calculation of AAB’s pre-accident weekly earnings (‘PAWE’). The amount of PAWE affects the amount of weekly payments of statutory benefits.
3. On 7 March 2018, the insurer decided that the amount of AAB’s PAWE was $971.04. AAB disagreed. He applied for an internal review and submitted that the amount should have been $1,189. The insurer affirmed its decision on 27 March 2018.
4. AAB applied for a merit review by the Dispute Resolution Service on 24 April 2018.
5. I have read and considered the submissions made by AAB and the insurer. I have dealt with the issues raised by those submissions in the reasons below.
Pre-accident weekly earnings
6. ‘PAWE’ is defined by clause 4 of Schedule 1 of the Act. Sub-clause (1) states:
7. None of the exceptions in subclause (2) apply here. There is also no dispute that AAB is ‘an earner who is injured as a result of a motor accident’. The critical issue here is the weekly average of the gross earnings received by AAB as an earner during the 12 months immediately before the day on which the motor accident occurred.
8. AAB completed an application for personal injury benefits form dated 19 December 2017. He declared weekly earnings of $1,731 gross and $1,274 net. He later prepared a ‘summary of income details’ document signed by his solicitor on 2 February 2018. It tabulates 44 weeks of business income from 27 November 2016 to 10 December 2017. The ‘weekly pay’ recorded in the table is generally supported by other evidence before me: weekly payment summaries emailed to AAB by FSG and bank statements that show deposits from FSG into AAB’s bank account. The sum of ‘weekly pay’ is $100,416 which AAB then averaged over 44 weeks to get $2,282. However, the table does not address business expenses beyond franchisee fees. The information in AAB’s tax returns (discussed below) shows that he had other business expenses.
9. In his application for internal review dated 13 March 2018, AAB said he wanted ‘Reassessment of the Pre Accident Weekly Earnings from $971.04 to Gross weekly preinjury earnings of $1189’. The basis for this reassessment was outlined in an email from AAB’s solicitor to the insurer on 5 February 2018. The email reads (emphasis in original):
The tax return attached is for a part year ie 28 weeks of operation (December 2016 – June 2017)
Gross revenue $64,303, (ie an average of $2296 per week),
Declared expenses of $1187,
Gross weekly preinjury earnings of $1189.
Expenses in the tax return ($33,248, divided by 28 weeks (of operation) equals on average $1187 per week.
10. AAB’s tax return for the year ended 30 June 2017 is before me. AAB declares taxable income of $21,916. His total income was $55,164 made up of $55,079 in business income and $85 in gross interest. AAB claimed deductions for work expenses totalling $33,248 as follows:
- contractor, sub-contractor and commission expenses $16,524
- depreciation expenses $3,000
- motor vehicle expenses $4,600
- all other expenses $9,124
11. The only other amounts referred to in the tax return are AAB’s spouse’s income of $14,000. This spousal income cannot be included in AAB’s PAWE because the definition of PAWE only includes gross earnings ‘received by the earner as an earner’.
12. Consistent with the tax return, AAB’s notice of assessment for the year ended 30 June 2017 confirms that his taxable income was $21,916.
13. It is clear to me on the available evidence that AAB’s solicitor miscalculated ‘gross revenue’ at $64,303. AAB’s ‘gross revenue’ from his business was $55,079 for the year ending 30 June 2017. After accounting for business expenses, his ‘gross earnings’ from the business were actually $21,831. When averaged over 28 weeks it gives $779.68, a figure significantly less than what was claimed in the email of 5 February 2018.
14. In my view, AAB’s claim that his PAWE should be $1,189 was flawed in two ways. First, there was a mistaken understanding of the information in the tax return which was the key piece of evidence underpinning that claim. Second, he did not address the ‘12 months immediately before the day on which the motor accident occurred’ as required by the legislation.
15. On the other hand, the insurer relies on a report by Mr Robert Smith of Vincents dated 2 March 2018. Mr Smith is a chartered accountant. He says his ‘calculations represent my best estimate of the Claimant’s PAWE having regard to the relevant provisions of the Act and the information provided by the Claimant’.
16. An important assumption that underpins Mr Smith’s report relates to the phrase ‘gross earnings’ referred to in the definition of PAWE. Mr Smith says ‘In relation to self-employed workers, I have interpreted the phrase “gross earnings” to mean the Net Profit earned by a self-employed Claimant after accounting for business expenses but before income tax’. I agree that this is the correct approach to ‘gross earnings’ for the self-employed.
17. Mr Smith examined the financial information that I have referred to earlier and came to the view that AAB had gross income of $99,615 in the 12 months immediately before the day of the motor accident. That is very close to AAB’s calculation of $100,416 in the ‘summary of income details’ document dated 2 February 2018. The small difference appears to be because AAB calculated from 27 November 2016, a period just outside the 12-month period that the Act mandates. I prefer Mr Smith’s calculation because he addresses the correct period.
18. Mr Smith then estimated AAB’s total business expenses in the 12-month period by extrapolating on the business expenses that AAB declared in the tax return for the year ending 30 June 2017. Mr Smith estimated total expenses of $49,121 over the 12-months. I have read Mr Smith’s report closely and I consider that the reasons he gave for that estimation are logical, reasonable and persuasive.
19. Mr Smith then estimated AAB’s PAWE to be:
$50,494 ÷ 52 weeks = $971.04
20. I consider that Mr Smith’s estimate is, on the information available, the best indication of the amount of AAB’s PAWE. I affirm the insurer’s decision. The amount of AAB’s PAWE remains at $971.04.
Dispute Resolution Service Merit Reviewer