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ABM v NRMA Insurance [2018] NSWDRS MR 039

NSW DISPUTE RESOLUTION SERVICE (NSWDRS)
JurisdictionMerit Review
CatchwordsPre-accident weekly earnings – PAWE – self-employed – director fee's – gross earnings – net earnings – fringe benefits – personal exertion
Legislation cited                    Motor Accidents Injury Act (NSW) ss  7.13(4), Schedule 1 (4)(1), Schedule 1(4)(2), Schedule 2(1)(s)
Motor Accident Guidelines effective 13 July 2018 s 7.12(1)
Motor Accident Injuries Regulation 2017 (NSW)
Cases cited

N/A

Text citedN/A
Parties ABM - Claimant
NRMA Insurance - Insurer
DisclaimerThis decision has been edited to remove all Unique Personal Identification including the name of the Claimant.

Merit Review Certificate

View the certificate

Issued under section 7.13(4) of the Motor Accident Injuries Act 2017

The Claim
Claimant ABM
Insurer NRMA Insurance
Claim Number NWRTP1801223
The Reviewable Decision
Reviewable decision-makerKaren Burgoyne
Date of Reviewable decision                                         3 August 2018 (internal review)
Nature of Reviewable decision The amount of statutory benefits payable under Division 3.3 (Weekly payments of statutory benefits to the injured person)
The Merit Review
Our Reference 10047008
Merit Reviewer Stavros Georgiadis
Date of Merit Review Certificate 22 October 2018

Merit Reviewer's Determination

This determination relates to a merit review matter, which is a reviewable decision under Schedule 2(1)(s) of the Motor Accident Injuries Act 2017 (" the Act"). The merit review matter is about the amount of weekly payments of statutory benefits payable to the Claimant under Division 3.3 (weekly payments of statutory benefits to injured persons).

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the following decision is made in substitution for the reviewable decision:
o  The amount of the Claimant's PAWE is $385.00.
  • Effective Date: This determination takes effect on 22 October 2018.
  • Legal Costs: The applicant was not represented by a legal practitioner in these proceedings.

A brief statement of my reasons for this determination are attached to this certificate.

Stavros Georgiadis
Merit Reviewer, Dispute Resolution Service

Merit Reviewer's Reasons for Determination

Background

1.   The Claimant, ABM, was injured in a motor accident on 30 May 2018. There is a dispute between the Insurer and the Claimant in respect of the amount of weekly payments of statutory benefits payable to her under Division 3.3 of the Motor Accidents Injuries Act 2017 (weekly payments of statutory benefits to injured persons).

2.   On 13 July 2018, the Insurer wrote to the Claimant and advised that she was entitled to weekly payments of statutory benefits, calculated on the basis that her Pre-Accident Weekly Earnings (PAWE) rate was $385.00. That decision covered the weekly payments of statutory benefits payable by the Insurer to the Claimant from the date of accident.

3.   The Claimant applied for an internal review by the Insurer and provided additional information. On 3 August 2018, the Insurer provided the Claimant written notice that it had calculated the PAWE rate to be reduced to $129.44.

4.   The Claimant disputes the Insurer's decision and lodged an application for merit review with the Dispute Resolution Service on 29 August 2018. The application has been made in accordance with section 7.12(1) of the Act and the Motor Accident Guidelines 2017 (the Guidelines).

Documents and Information

5.    I have considered the documents provided in the application and the reply and any further information provided by the parties. This includes the written submissions and accompanying documentary material in the application and the reply.

Submissions

6.   The Claimant submits that as sole Director and employee of (Claimant’s Employer) ("the Company") all her income is derived from personal exertion. She submits that her PAWE should include the 'personal benefit' that is gained by her from Company expenses. She sets out that after including such components from accounts relating to rent, telephone, motor vehicle expenses, staff training and development, accounting fees, interest expenses, insurance, office expenses, travel expenses and Director's fees, the PAWE should be set much higher. She claims her PAWE would be closer to $1,350.00 if the 'personal benefit' of her business expenses was included in the assessment .

7.   The Insurer submits that gross earnings or Net Business Income refers to Net Profit earned by a self-employed Claimant after accounting for business expenses but before tax. The submission is that in the 12 months prior to the accident, the Claimant's business income was $69,169 and once relevant business expenses are deducted, the Company incurred a loss of $13,287 for the same 12 month period. After adding back the Director's fees of $20,020 for the period to the above loss, the Claimant's annual pre-accident income over 12 months was calculated (rounded) at $6,731 or $129.44 PAWE.

Legislation

8.  In conducting my review I have considered the following legislation and guidelines:

a.  Motor Accident Injuries Act 2017 (NSW) (11 the  Act 11

b.  Motor Accident Guidelines effective 13 July 2018 (11 t he Guideline s" )

c.  Motor Accident Injuries Regulation 2017 (NSW) ("the Regulation")

Reasons

9.  Clause 4(1) of Schedule 1 of the Act defines "PAWE" as follows:

a.    Pre-accident weekly earnings, in relation to an earner who is injured as a result of a motor accident, means the weekly average of the gross earnings received by the earner as an earner during the 12 months immediately before the day on which the motor accident occurred, unless subclause (2) applies.

10.   Subclause (2) offers different methods to calculate PAWE. However, those other methods do not apply in this case because I accept that the Claimant was a self-employed person when the motor accident occurred and she was obtaining earnings derived during the period immediately preceding the motor accident.

11.   I have also had regard to the SIRA Guidance note in respect of s.3.6 and Schedule 1 of the Act relating to weekly payments of statutory benefits. Notably, Schedule 1 defines income from personal exertion to include:

  • the amount that is income of the person consisting of earnings, salary, wages, commissions, fees, bonuses, pensions, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to services rendered, and
  • the proceeds of any business carried on by the person either alone or in partnership with any other person, and
  • any amount received as bounty or subsidy in carrying on a business.

12.  The Claimant has not referred for merit review the Insurer' s decision that they are an earner who is injured as a result of a motor accident. There is no dispute that the Claimant is an earner under the Act. Therefore, the Claimant's PAWE is the average of her gross earnings during the 12 months immediately before the day on which the motor accident occurred (hereafter "the relevant period " ) under clause 4(1) of the Schedule. The motor accident occurred on 30 May 2018. The relevant period therefore is the 12 months from end May 2017.

13.  During the relevant period, the Claimant received earnings from the pre-injury employer, (Claimant’s Employer). The Claimant's latest completed taxation return available (being for the 2016/17 financial year) shows the Claimant received $20,000 in Director's fees from the Company as well as $1:00 in gross interest resulting in a taxable income of $20,001 for the 2017 year. The ATO Notice of Assessment issued on 23 May 2018 confirms the Claimant's total income for 2017 as $20,001. Her personal taxation return shows no other income or accounting for Fringe Benefits or allowances relating to purported 'personal benefit' gained from the Company or any other wages/ salary, commissions, bonuses, etc paid.

14.  It is evident that the Insurer's initial decision of 13 July 2018 resulted in PAWE of $385.00 on the basis of the Director's fees recorded on the Company's financial records for the period from end May 2017 to end May 2018 of $20,020 (i.e. $20,020 / 52 = $385 per week). On internal review of 3 August 2018, the Insurer accounted for the Company's income for the 12 months to end May 2018 of $69,169 and after allowing for total expenses of $82,456 for this period added back the Company loss of $13,287 to the Director's fees of $20,020 to result in overall earnings (rounded) of $6,731 for the Claimant. The Insurer therefore, subsequently reduced the PAWE to $129.44 ($6,731 / 52).

15 .  The Company is a separate legal entity to the Claimant. The sales revenue of $69,169 is therefore revenue of the Company. Available to me are the Company Taxation returns to 2017 and relevant BAS lodgements. The Claimant has lodged separate individual taxation returns. Also before me is the Claimant's aforementioned most recent taxation return in respect of the 2017 financial year. I accept the Claimant's submission that the 2018 taxation returns for the Company and for herself have not yet been finalised or lodged.

16.  I note the Insurer' s submission that there is 'no provision within the legislation which allows for adding back expenses that are still going to be incurred even when the business is not in operation' (referring to SIRA Merit Review Reference M A06 / 18). I have nevertheless considered that Claimant's submissions relating to the value of 'personal benefit' gained by her from Company expenses. On this point I have already noted no mention of any such gain or benefit on her personal taxation return, either in the form of a Fringe benefit, allowances, or other wage or salary component other than the Director's fee of $20,020 for the relevant 12 month period to 30 May 2018.

17.  I note also that the Company taxation returns up to 2017 have carried forward prior year profits of $22,791 in 2016 and $35,665 in 2017 as well as noting the loss recorded to end May 2018 of $13,287. It is evident from the Claimant's individual taxation returns that there has been no distribution of Company profits (or losses for that matter) from the Company to the Claimant. The Company's taxation return for 2017 records at Item 13 "Tax losses carried forward to later income year s" of $59, 626 in aggregate.

18.  There is no accounting for distribution of any of the Company's losses (or profits) in the Claimant's individual taxation return for 2017. The BAS documents and GST calculations for the period 30 May 2017 to 30 June 2018 also do not disclose any salary or wage expenses. I place weight on the ATO Tax Assessment for 2017 which shows the earnings derived by the Claimant were essentially the Director's fees for that year (other than $1.00 in interest).  I accept from all this that the Claimant's earnings from personal exertion are equivalent to the amounts paid to her as Director's fees from the Company because there is no record of any other wages/ salary, commissions, bonuses, etc paid. In the material 12 months to 30 May 2018, from the Claimant's financial records and the accounting discussed, I find this equates to $20,020 in gross earnings received by the Claimant as an earner.

19.   The issue in question is whether the Company's accounting loss of $13,287 for the same period should be added back to reduce the PAWE. I have already noted that the Claimant's individual taxation returns have not accounted for any losses (or profits)  from  the  Company  to  the Claimant or provided for any other allowances, Fringe Benefits, wages/ salary, commissions, bonuses, etc other than the Director's fees.

20.  I have also had regard to the recent decision in SIRA Merit Review Reference MA04/18  which sets out : As PAWE requires consideration of the " gross earnings received by the earner as an earner", I must look at what the earner earns or profits from his or her skills and labour when calculating his or her PAWE. Put simply, the Claimant's business expenses are  not  to  be included in the calculation of PAWE. My above view of accounting separately for profits and losses in the Company and for the Claimant, is consistent with this decision. The situation would be different if such losses or profits were  allocated  or  distributed  from  the Company and recorded in the Claimant's individual taxation returns. In that case, Company taxes and Fringe Benefits taxes would also likely be applied.

21.  In this particular case, as no such distributions have been made or recorded I am satisfied that I should not add back Company losses to the individual earnings of the Claimant or include purported 'personal benefit' gained by the Claimant from Company expenses. This is consistent  with  the  notion  of  counting  only  gross  earnings  received  by  the  Claimant  as  an earner as set out in cl.4(1) of Schedule 1 of the Act. I also do not consider Company losses to amount to 'proceeds' of a business carried on by the person when considering the Schedule 1 definition of income from personal exertion.

22.  For the above reasons, I find that the Claimant' s earnings from personal exertion are equivalent to the amounts paid to her as Director's fees for her work in the Company in the material 12 month period to 30 May 2018. I find that this sum is $20,020. This equates to PAWE of $385 (i.e . $20,020 / 52 weeks= $385 per week) .

Conclusion

23.  The review decision referred for merit review by the Claimant relates to the amount of her PAWE and the decision covers weekly payments of statutory benefits payable by the relevant Insurer to the Claimant from the date of accident. It is the function of the Dispute Resolution Service on merit review to arrive at the correct or preferable outcome in respect of the weeks covered by the reviewable decision that is referred for review.

24.  Accordingly, this determination applies to weekly payments of statutory benefits from the day of the accident being 30 May 2018. The Insurer is to pay the Claimant the difference between what has been paid to the Claimant and what is entitled to be paid in accordance with the decision above.

Legal Costs

25.   The applicant was not represented by a legal practitioner. There are no costs.

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the following decision is made in substitution for the reviewable decision :
o  The amount of the Claimant's PAWE is $385 .00.
  • Effective Date: This determination takes effect on 22 October 2018.
  • Legal Costs: The applicant was not represented by a legal practitioner in these proceedings.

Stavros Georgiadis
Merit Reviewer, Dispute Resolution Service