Jurisdiction: Merit review
Catchwords: PAWE – weekly payments – statutory benefits – pre-accident weekly earnings – net business income – sole trader – taxi driver
- Motor Accident Injuries Act 2017 (NSW) ss 7.13, Schedule 1, Schedule 2
- Motor Accident Injuries Regulation 2017
- Motor Accident Guidelines effective 13 July 2018
- AEC – Claimant
- NRMA Insurance Australia Limited– Insurer
Disclaimer: This decision has been edited to remove all unique personal identification including the name of the claimant.
Merit review certificate
Issued under section 7.13(4) of the Motor Accident Injuries Act 2017
- Insurer:NRMA Insurance Australia Limited
- Claim Number:NWRTP180202301
The reviewable decision:
- Decision-maker:Adam Crocker
- Date of decision:13 December 2018
- Nature of decision:The amount of Pre-Accident Weekly Earnings
The merit review:
- Our Reference:10079741
- Merit Reviewer:Tajan Baba
- Date of this Certificate:21 March 2019
This determination relates to a merit review matter about weekly payments of statutory benefits to injured persons. This is a reviewable decision under Schedule 2(1)(a) of the Motor Accident Injuries Act 2017.
My determination of the Merit Review is as follows:
- The reviewable decision is affirmed
- The amount of AEC’s Pre-Accident Weekly Earnings is $175.31.
A brief statement of my reasons for this determination is attached to this certificate.
Dispute Resolution Service
Reasons for decision
1. AEC was injured in a motor vehicle accident on 17 August 2018. She was self-employed as a taxi driver at the time.
2. The Insurer accepted AEC’s claim under the Motor Accidents Injuries Act 2017 (“the Act”) and made a decision on 13 December 2018 that the amount of AEC’s Pre-Accident Weekly Earnings (“PAWE”) is $175.30.
3. AEC sought an internal review of the Insurer’s decision about the amount of her PAWE. On internal review dated 18 January 2019, the insurer affirmed the original decision.
4. AEC lodged an application for merit review with the Dispute Resolution Service (“DRS”) on 21 February 2019. The application was accepted by the DRS.
5. The Insurer’s decision about PAWE affects the amount of weekly payments of statutory benefits payable to AEC. It is a reviewable decision under Schedule 2(1)(a) of the Act.
Documents and information
6. I have considered the documents provided in the application and the reply and any further information that has been provided and exchanged between the parties.
7. AEC’s legal representatives, NSW Compensation Lawyers, make the following submissions on her behalf in the application for merit review:
- The Insurer has determined that AEC’s entitlement to weekly benefits for lost earnings was correctly calculated at $175.30 net per week.
- This does not take into account AEC’s system of work in that she is the owner of one taxi of registration number XXXXX and her husband is the owner of another taxi of registration number XXXXX. AEC and her husband both work as taxi drivers. They work under a business name but both have individual ABN numbers and are sole traders.
- The Insurer has determined that AEC’s earnings are correctly calculated at $175.30 net per week. AEC disputes this. AEC’s 2018 year end tax return indicates that her income is probably calculated at $513.32 net per week.
- AEC lodges the application for Dispute Resolution because she has 28 days in order to do so. She requires further time in order to compile relevant financial materials including profit and loss statements and a report from her accountant concerning her income and actual loss.
8. On 5 March 2019, NSW Compensation Lawyers submitted further information to DRS under cover letter dated 4 March 2019.
9. The Insurer makes the following submissions in its reply to AEC’s application:
- As the subject accident occurred on 17 August 2018, the “12 months immediately before the day on which the motor accident occurred” is the period from 17 August 2017 to 16 August 2018.
- PKF accountants were engaged to assist with the calculation of AEC’s PAWE. PKF Accountants requested the following documentation:
- Claimant’s 2017 and 2018 income tax returns;
- Notice of Assessment for the 2018 financial year;
- Business Activity Statement for the period ending 30 September 2018; and
- Summary of income and expenses for the following periods:
- 18 August 2017 to 30 June 2018; and
- 1 July 2018 to 17 August 2018.
- AEC was unable to provide some of the requested documentation, including her income tax return for the 2018 financial year.
- On the information that was available, PKF Accountants completed their assessment and considered the PAWE was $175.30.
- To assess AEC’s PAWE requires an assessment of AEC’s gross earnings or net business income.
- Gross earnings or net business income refers to the net profit earned by a self-employed claimant after accounting for business expenses but before tax.
- PKF accountants considered that the gross income for the period 1 July 2017 to 30 June 2018 was $66,488.00 and expenses totalled $57,372.00. After deducting the expenses, AEC’s net business income was $9,116.00. As such, the PAWE was calculated to be $175.30. Details of the calculations and rationale for the assessment are contained in their report dated 5 December 2018.
- AEC thereafter provided an undated letter disputing the figure and providing reasons.
- PKF accountants considered AEC’s position but still considered that the PAWE was $175.30.
- Should the Merit Reviewer disagree with the Insurer’s position, the Insurer invites the Merit Reviewer to make a direction to AEC to provide all necessary evidence in order to assess her PAWE.
10. In conducting my review, I have considered the following legislation and guidelines:
- Motor Accident Injuries Act 2017 (NSW) (“the Act”)
- Motor Accident Guidelines effective from 30 April 2018 (“the Guidelines”)
- Motor Accident Injuries Regulation 2017 (NSW) (“the Regulation”).
Pre-accident weekly earnings
11. PAWE is defined under clause 4 of Schedule 1 of the Act. Subclause (1) of clause 4 provides:
"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."
12. I note that none of the exceptions under subclause (2) apply in AEC’s case and the Insurer accepts that AEC is an ‘earner’. The issue that is in dispute between the parties is therefore “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”.
13. At the time of the accident, AEC was self-employed as a Taxi Driver. The information before me indicates that AEC and her husband both work as taxi drivers under the business name ‘X and X AEC’ but have individual ABN numbers and operate as sole traders.
14. The date of the motor accident was 17 August 2018. The assessable period for the purposes of determining AEC’s PAWE under clause 4 of Schedule 1 of the Act is therefore 16 August 2017 to 16 August 2018, being the 12 months immediately before the day on which the motor accident occurred.
15. The Insurer engaged PKF(NS) Forensic Accountants Pty Limited (“PKF”) to assist in determining AEC’s PAWE. PKF produced a report dated 5 December 2018 (“PKF’s report”) that assessed AEC’s PAWE at $175.30.
16. PKF relied on the following information provided by AEC:
- AEC’s Income Tax Return and Notice of Assessment for the 2017 financial year
- AEC’s Business Activity Statement for the period 1 July 2017 to 30 June 2018
- AEC’s summary of expenses for the 2018 financial year (handwritten)
- We have summarised the Claimant’s Business Activity Statements for the 2018 financial year to determine the Claimant’s income and have used the Claimant’s summary of expenses for the 2018 financial year as a basis to estimate the Claimant’s expenses. The income and expenses are consistent with the Claimant’s 2017 Income Tax Return and 2018 financial year Business Activity Statements. In the absence of details of income and expenses matching the 12 months immediately prior to 17 August 2018, we have assessed the Claimant’s PAWE based on her records for the 2018 financial year.
18. The figures relied upon in PKF’s report were cross-checked with the financial documents submitted by both parties, revealing no discrepancies or miscalculation by PKF.
19. On 5 March 2019, AEC’s legal representatives submitted a letter from Taxation Masters, dated 26 February 2019. The letter attaches AEC’s profit and loss statements for the 2014-2018 financial years and lists the gross income and net income for each year. It then states:
- Based on the above figures your average yearly income is $30,392 not including the 2016 Year as that was an exceptional year where you had massive car repairs.The Insurance assessors have used your BAS figures to calculate your net income, these figures include capital items purchased during the year, hence the reason why your income has been grossly understated by the assessors, for the current year.
20. In respect to the statement that AEC’s “average yearly income is $30,392” based on averaging her income from 2014 to 2018, I note that clause 4 of Schedule 1 of the Act requires that AEC’s earnings in the 12 months before the accident be considered. The amount earned in previous financial years is therefore irrelevant for the purposes of this review.
21. The letter from Taxation Masters attaches the profit and loss statement for the 2018 financial year (“Taxation Masters’ Profit & Loss Statement”). This is also the period PKF considered when determining PAWE. Taxation Masters’ Profit & Loss Statement shows AEC’s income at $28,098.00, from a total income of $66,438.00 minus expenses in the sum of $38,340.00. The statement includes a list of the expenses and the individual cost of each.
22. PKF’s report also includes a ‘Summary of Business Income & Expenses’ document for the 2018 financial year, prepared by PKF based on the financial documents submitted, at Annexure 1 (“PKF’s Summary of Business Income & Expenses”). This document shows AEC’s income at $9,116.00, from a total income of $66,488.00 minus expenses in the sum of $57,372.00. This statement also includes a list of the expenses and the individual cost of each. It is based on dividing the total income of $9,116.00 by 52 weeks that PKF arrived at AEC’s PAWE in the amount of $175.30.
23. AEC submits that the 2018 year end tax return indicates that her income is probably calculated at $513.32 net per week.
24. The Insurer has submitted that AEC was unable to provide some documents requested, including her income tax return for the 2018 financial year. This document was also not included as part of the further documents that were submitted by Taxation Masters on 5 March 2019. On 7 March 2019, DRS requested further information from AEC. Specifically, AEC’s Notice of Assessment for the year ended 30 June 2018 and her Individual Tax Return for 1 July 2018 to 30 June 2018. DRS has not received a response to this request to date.
25. Taxation Masters’ Profit & Loss Statement, referred to in paragraph 21 above, supports that AEC’s PAWE would be approximately $540.35, being the income of $28,098.00 provided on this statement, divided by 52 weeks.
26. As can be seen, there is a significant discrepancy in the amount of PAWE determined by PKF ($175.30) and that indicated by Taxation Masters’ Profit & Loss Statement ($540.35). These documents at large mirror each other in respect to the total incomes and cost of individual expenses. The discrepancy arises in the total cost of expenses. PKF’s Summary of Business Income & Expenses states AEC had expenses in the sum of $57,372.00 in that financial year and the Taxation Masters’ Profit & Loss Statement states the expenses were $38,340.00.
27. When the two documents are compared side by side, the reason for the large discrepancy in the total sum of the expenses can be seen to be at large owing to an expense for ‘Repairs’ in the sum of $25,553.00 listed in PKF’s Summary of Business Income & Expenses. This expense is not listed in Taxation Masters’ Profit & Loss Statement.
28. The letter from Taxation Masters dated 5 March 2019, outlined at paragraph 19 above, states that the reason why AEC’s income was “grossly understated” in PKF’s report is because the 2018 financial information used by PKF “include capital items purchased during the year”. This is not explained further however and is not supported by PKF’s Summary of Business Income & Expenses document which does not list the purchase of any capital items.
29. In the absence of the Notice of Assessment and Individual Tax Return for the 2018 financial year that has been requested, it is difficult to ascertain AEC’s PAWE on PKF’s Summary of Business Income & Expenses and Taxation Masters’ Profit & Loss Statement as they provide inconsistent information in relation to AEC’s expenses in the 2018 financial year.
30. There is a form titled ‘Application for personal injury benefits’ also before me, dated 4 September 2018, in which AEC indicates that her earnings at the time of the accident was $700.00. There is no further information in relation to earnings in this form. This amount is also inconsistent with the remainder of the information and it is not clear whether it deducts expenses.
31. I am nevertheless required to determine AEC’s PAWE based on the information before me. For the purposes of this review, having regard to some of the reasons noted above, I prefer to rely on PKF’s Summary of Business Income & Expenses document as opposed to Taxation Masters’ Profit & Loss Statement. As noted above, PKF’s Summary of Business Income & Expenses was prepared based on information submitted by AEC including a handwritten document outlining the expenses incurred under ‘Repairs’. Taxation Masters’ Profit & Loss Statement excludes this large expense incurred for repairs, resulting in a higher income for the 2018 financial year, and there is no explanation before me as to why the expense was excluded.
32. Further, I note that the 2018 income of $9,116.00 according to PKF’s Summary of Business Income & Expenses is consistent with AEC’s Notice of Assessment and Individual Tax Return for the 2017 financial year which I do have before me. These documents show that AEC’s taxable income for the 2017 financial year was $31,677.00 however this included a government industry payment in the sum of $20,000.00, which I do consider to be earnings for the purposes of the Act and in any event was not received again in the 2018 financial year or the 12 months before the motor accident.
33. I note that the letter from Taxation Masters also attaches a profit and loss statement for the period 16 August 2017 to 16 August 2018 showing an income of $28,465.00 after expenses are deducted. While this covers the exact 12 months immediately before the motor accident, given that I have found that Taxation Masters’ Profit & Loss Statement is inconsistent with the remainder of the information before me, I am not persuaded and attribute less weight to the profit and loss statements from Taxation Masters. In this instance, in the absence of any further information covering the exact 12 months before the accident, I consider the most reliable information before me in determining AEC’s PAWE is the documents covering the 2018 financial year.
34. As outlined above, these documents show that AEC’s earnings in the 2018 financial year was $9,116.00 after expenses in the sum of $57,372.00 are deducted. The amount of $9,116.00 divided by 52 weeks results in PAWE of $175.31. This is the most reliable estimate of AEC earnings in the 12 months immediately before the injury.
35. I find that AEC’s PAWE is $175.31.
36. The reviewable decision is affirmed.
Merit Reviewer, Dispute Resolution Service