Ataei v QBE Insurance (Australia) Limited
[2023] NSWPICMR 23
•4 April 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Ataei v QBE Insurance (Australia) Limited [2023] NSWPICMR 23 |
| ClaimanT: | Ali Ataei |
| Insurer: | QBE Insurance (Australia) Limited |
| Merit Reviewer: | Katherine Ruschen |
| DATE OF DECISION: | 4 April 2023 |
| CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; merit review; dispute about payment of weekly benefits under Division 3.3; meaning of pre-accident weekly earnings (PAWE); Schedule 1, clause 4(1); sole trader; business expenses; GST; proceeds of the business; earnings received as an earner; Held – the reviewable decision is set aside. |
| Determinations made: | CERTIFICATE OF DETERMINATION Issued under s 7.13(4) of the Motor Accident Injuries Act2017 Determination The reviewable decision is about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is: (a) set aside, and (b) the claimant’s pre-accident weekly earnings are $737.82. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Ali Ataei (the claimant) and the insurer about the amount of weekly payments of statutory benefits payable under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).
The claimant was involved in a motor accident on 13 October 2022.
The claimant made an application for personal injury benefits under the MAI Act.
On 9 December 2022 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $802.51 for the purpose of calculating whether the claimant is entitled to weekly payment of statutory benefits under ss 3.6 and 3.7 of the MAI Act.
On 12 December 2022 the claimant requested an internal review of the insurer’s PAWE decision of 9 December 2022.
On 23 December 2022 the insurer issued their internal review decision in which the insurer redetermined the claimant’s PAWE in the sum of $804.47.
The claimant has requested a merit review of the internal review decision dated
22 December 2022.
SUBMISSIONS
The claimant contends that in calculating PAWE as the weekly average over a 52 week period under Schedule 1, cl 4(1) of the MAI Act the insurer has only included income payments across a 39 week period and that there are missing income payments in the insurer’s PAWE calculation.
The insurer submits the claimant’s PAWE falls for assessment under Schedule 1, cl 4(1) of the MAI Act and says the weekly average of the claimant’s gross earnings received as an earner in the 52 week pre-accident period is $804.47. The insurer has calculated PAWE based on gross profit of the claimant’s sole trader business less expenses incurred by the business to generate that profit.
REASONS
Issues
There is no dispute that the claimant is an earner within the meaning of the MAI Act.
There also does not appear to be any dispute that the claimant’s PAWE falls under Schedule 4(1) and not one of the exceptions to cl 4(1) in cl 4(2).
In any event, there is no evidence to suggest any of the exceptions in cl 4(2) might apply to the claimant’s circumstances. Accordingly, I am satisfied on balance that the claimant’s PAWE is to be calculated under cl 4(1).
What is the claimant’s PAWE under cl 4(1)?
The claimant worked as a sole trader/self-employed driver for Uber and Didi ride share services as at the date of the motor accident.
The claimant says the insurer has not included all earnings he received from Uber and Didi in the 12 month period before the day of the motor accident. The basis of this contention is unclear. Pursuant to directions issued to the parties on 16 February 2023 the claimant was directed to provide a statement, which:
(a)
identifies the income payments the claimant contends the insurer did not include as gross earnings in the period 13 October 2021 to
12 October 2022 by listing the payment dates, the amount of each payment and the supporting document evidencing each payment listed by the claimant as a payment not included by the insurer, and
(b) sets out how the claimant says PAWE should be calculated by specifying the total amount the claimant says he earned in the period 13 October 2021 to 12 October 2022, how that total amount has been calculated and how the claimant has calculated PAWE.
The claimant did not comply with this direction. Accordingly, there has been no specific identification by the claimant of any income payment not included in the insurer’s PAWE calculation. The claimant has also not provided his competing calculation of PAWE.
My role as merit reviewer is to determine what is the correct and preferable decision on the information before me.
Various financial documents have been provided. However, the information is incomplete in that there is no BAS covering the period 1 to 12 October 2022 and no evidence of business expenses incurred from 1 to 12 October 2022. To the extent there is an October 2022 taxation summary providing evidence of gross sales inclusive of GST and service charges retained by Uber in October 2022 the bank statements indicate part of the October 2022 taxation summary covers income received and service charges retained after the 12 month period under cl 4(1) ended on
12 October 2022.
I propose to undertake my own assessment of the claimant’s earnings based on the documents before me. It is therefore not necessary for me to expressly determine whether the insurer excluded any payments from their PAWE calculation.
The 12 month pre-accident period under cl 4(1) is 13 October 2021 to
12 October 2022.
Clause 4(1) relevantly provides that PAWE 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…” [emphasis added]
The claimant has provided bank statements for the account into which he received earnings from Uber and Didi for the whole of the 12 month pre-accident period. Clause 4(1) is concerned with earnings “received” during the 12 month pre-accident period. On this basis and given the otherwise incomplete information for October 2022 noted above, I consider on balance that the bank statements are the most reliable evidence of earnings received by the claimant in the 12 month pre-accident period.
The bank statements demonstrate the claimant received the following income from Uber and Didi in the period 13 October 2021 to 12 October 2022:
Period/Month
Uber
Didi
13 to 31 October 2021
$1,454.13
November 2021
$5,724.78
December 2021
$7,203.24
January 2022
$3,598.13
February 2022
$3,915.59
March 2022
$7,349.04
April 2022
$8,425.69
May 2022
$11,619,21
June 2022
$7,374.37
July 2022
$8,517.06
$619.96
August 2022
$10,991.02
$1,456.69
September 2022
$9,206.80
$39.43
1 to 12 October 2022
$5,246.64
Subtotal
$90,625.70
$2,116.08
Total
$92,741.78
It is apparent from an analysis of the totality of the financial documents that payments received into the claimant’s bank account are inclusive of GST on sales.
The GST received by the business is not earnings and is remitted to the government pursuant to the quarterly business activity statements (BAS). Accordingly, it is necessary to determine the GST component of income received by the claimant’s business from Uber and Didi, which was then remitted to the Australian Taxation Office (ATO).
It is apparent from the documents that the GST figure cannot be calculated based on the amounts deposited into the claimant’s bank account. This is because Uber and Didi pay the claimant on the basis of gross sales inclusive of GST less their service fees charged to the claimant. The best available evidence of the GST component of the income received into the claimant’s bank account are the BAS. The BAS show sales included the following GST:
(a) 1 October 2021 to 31 December 2021: $2,613;
(b) 1 January 2022 to 31 March 2022: $2,613;
(c) 1 April 2022 to 30 June 2022: $2,613, and
(d) 1 July 2022 to 30 September 2022: $4,018.
The total GST received by the claimant’s business from 13 October 2021 to
30 September 2022 is therefore $11,857.
The records are insufficient to determine the GST received in the balance of the pre-accident period from 1 October 2022 to 12 October 2022. The claimant has not provided the BAS for 1 October 2022 to 31 December 2022, which would disclose the GST for this period. The Uber taxation summary for October 2022 is of limited assistance as figures are expressed as inclusive of GST and we know from the bank statements that some of this income was received by the claimant after
12 October 2022.
Given the amount of GST in issue for the discreet period from 1 to 12 October 2022 is not likely significant I propose to base it on the income received into the claimant’s bank account in that period, although it is likely GST would have been slightly higher given the method of payment by Uber noted above.
Income payments received into the bank account in the period 1 to 12 October 2022 total $5,246.64. The GST component of this would be $476.97 (10% of $4,769.67 is $476.97 and gives a total of $5,246.64).
Accordingly, the GST to be deducted from the total income received into the claimant’s bank account in the period 13 October 2021 to 12 October 2022 is $12,333.97 ($11,857 for the period 13 October 2021 to 30 September 2022 as per the BAS plus $476.97 for the period 1 to 12 October 2022 as per the above methodology).
Accordingly, I find on balance that the claimant’s business earned a total gross profit of $80,407.81 exclusive of GST from Uber and Didi in the period 13 October 2021 to
12 October 2022, being the gross payments into the claimant’s bank account of $92,741.78, less the GST component of $12,333.97 remitted, or to be remitted, to the ATO.
Schedule 1, cl 4(1) requires a determination of the claimant’s gross earnings received as an individual “earner” and not the gross earnings of the business itself. In so far as the claimant earns from the proceeds of the business, the “proceeds” received by the claimant as an “earner” are the net income of the business after accounting for all business expenses incurred to run the business, but before tax. Business expenses are not “proceeds” of the business that make it into the claimant’s hands as his “gross earnings”.
The claimant does not challenge the insurer’s deduction of business expenses in his submissions or documents. For the avoidance of doubt, however:
(a) for the reasons outlined above, as a sole trader the claimant’s earnings received as an earner are the net profit of the business after accounting for all expenses of the business;
(b) my conclusion that the claimant’s gross earnings from the business are the net profit of the business after deducting business expenses is consistent with previous merit review decisions including ABQ v NRMA (Merit Review) [2018] NSWSIRADRS 43 (17 October 2018), ACL v CIC Allianz Insurance Limited [2018] NSWDRS MR 064; AJQ v NRMA (Merit Review) [2020] NSWSIRADRS 44 (8 April 2020), APD v AAI Limited trading as GIO (Merit Review) [2020] NSWSIRADRS 198 (24 August 2020), APL v GIO (Merit Review) [2020] NSWSIRADRS 207 (16 September 2020), Mula v NRMA [2022] NSWPICMR 9, Hayes v GIO [2022] NSWPICMR 17, Le v Insurance Australia Ltd t/as NRMA Insurance [2022] NSWPICMR 47 and Shqau v AAMI [2022] NSWPICMR 6 and a number of other recent decisions of the Commission;
(c) the reasons set out in the abovementioned decisions should be read as being the reasons for reaching this conclusion in this matter, and
(d) the conclusion is also consistent with the presentation of the claimant’s individual earnings to the ATO in his tax return where he declares his individual earnings are the net profit of the business, as declared in the supplementary section of the tax return.
There is evidence of business expenses for most of the 12 month pre-accident period in the quarterly profit and lost statements. An analysis of the profit and loss statements against the Uber and Didi taxation summaries confirms that the business expenses in the profit and loss statements are in addition to charges already deducted by Uber and/or Didi, which are recorded in the taxation summaries. Accordingly, the expenses in the profit and loss statements must be deducted from the gross profit of the business to determine the net profit of the business which is, in turn the claimant’s gross earnings received as an earner.
The profit and loss statements show the following expenses of the business:
Quarterly period
Expenses
1 October 2021 to 31 December 2021
$15,538
1 January 2022 to 31 March 2022
$15,591
1 April 2022 to 30 June 2022
$6,425
1 July 2022 to 30 September 2022
$2,007
Total
$39,561
Given the bank statements show that all earnings received by the claimant in October 2021 were received after 13 October 2021 I conclude on balance that the expenses in the quarterly profit and loss statement from 1 October 2021 to 31 December 2021 were incurred by the business in the period 13 October 2021 to 31 December 2021. Therefore, the total expenses from 13 October 2021 to 30 September 2022 were $39,561, as set out above and as evidenced by the quarterly profit and loss statements.
The claimant has not provided sufficient evidence to determine the expenses he incurred for the balance of the pre-accident period from 1 to 12 October 2022. Gross profit, after taking out GST and after deducting service charges by Uber and Didi, from 13 October 2021 to 30 September 2022 was $75,638.14 ($80,407.81 less October 2022 income of $4,769.67 excluding GST). Expenses of $39,561 in this same period represent 52% of that income. This percentage is reasonably consistent with the percentage expenses incurred in the 2021/2022 tax year, which was approximately 48% of gross profit, excluding GST and the expenses percentage in the 2020/2021 tax return, which was 56.6% of the gross profit of the business excluding GST. Fifty-two per cent falls roughly in between the expenses percentage for the 2021 and 2022 tax years. I am therefore comfortably satisfied on balance that expenses for the 12 month pre-accident period likely represented 52% of gross profit, excluding GST.
It follows that a deduction of 52% needs to be made to earnings received from 1 to
12 October 2022 to account for business expenses likely incurred in this period in the absence of documentary evidence.
I have determined above that on balance, gross profit excluding GST from 1 to
12 October 2022 was $4,769.67. Business expenses at 52% would be $2,480.22. Accordingly, I am satisfied the following business expenses are to be deducted from the gross profit received in the period 1 October 2021 to 12 October 2022:
(a) expenses incurred from 13 October 2021 to 30 September 2022, as evidenced by the quarterly profit and loss statements: $39,561, and
(b) expenses incurred from 1 to 12 October 2022 based on average expenses representing 52% of gross profit excluding GST, as demonstrated by the average percentage of profit incurred for business expenses in the balance of the pre-accident period: $2,480.22.
Total expenses incurred in the period 13 October 2021 to 12 October 2022 are therefore $42,041.22. This amount is to be deducted from the gross profit (exclusive of GST) of the business in this period of $80,407.81 to produce the net income of the business which is, in turn, the gross earnings received by the claimant as an earner for the purpose of cl 4(1). The net profit after deducting business expenses is $38,366.59.
The claimant’s PAWE is therefore $737.82 ($38,366.59 divided by 52 weeks).
We know from the claimant’s tax return that in the 12 month period from 1 July 2021 to 30 June 2022 the claimant received earnings from the business after accounting for GST and business expenses totalling $41,021, which gives a weekly average of $788.86. My conclusion that the claimant’s PAWE is $737.82 is consistent with this earning history. There is nothing in the documents to suggest a significant increase in earnings in the period 1 July 2022 to 12 October 2022 (being that part of the pre-accident period under cl 4(1) that falls outside the 2022 tax return) such that the claimant’s weekly average could have increased considerably from the weekly average in the nearest 12 month period in respect of which there is a complete record of earnings. The tax return provides a complete record of earnings for the 12 months ending 30 June 2022 and shows a similar weekly average to my PAWE determination. For this reason and for the reasons set out above I am comfortably satisfied that the claimant’s PAWE is $737.82.
For the avoidance of doubt, I set out in the table below the alternative PAWE calculation based on gross sales in the BAS and information in the Didi and Uber taxation summaries.
The information in the BAS and taxation summaries is not sufficient to determine PAWE over the precise pre-accident period from 13 October 2021 to 12 October 2022. In particular, there is no information as to actual business expenses in October 2022, other than service charges deducted by Uber in that month. Further, the sales and charges in the Uber October 2022 taxation summary cover the period 1 to
31 October 2022. The bank statements show some of this income was received after the pre-accident period under cl 4(1) ended on 12 October 2022. The information is insufficient to determine the precise portion of the October 2022 taxation summary attributable to the period on or before 12 October 2022.
According to the bank statements all income in October 2021 was received after the commencement of the pre-accident period on 13 October 2021. On this basis and on the basis the information is complete to 30 September 2022 the alternative PAWE calculation below is in respect of the period 13 October 2021 to 30 September 2022, which is a period of 50.4 weeks.
Having regard to paragraphs 44 and 45 above, if PAWE is based on the BAS and Uber and Didi taxation summaries the claimant’s PAWE would be $660.28, calculated as follows:
13 October 2021 to 30 September 2022
Amount
Total gross sales inclusive of GST declared in BAS
$130,450.00[1]
Less GST per BAS
$11,857.00
Subtotal
$118,593.00
Plus tips per taxation summaries
$1,707.05
Subtotal
$120,300.05
Less service charges retained by Didi and Uber per taxation summaries (business expenses)
$47,455.71
Subtotal
$72,844.34
Less all other business expenses as per profit and loss statements
$39,561.00
Total net profit
$33,283.34
Net profit divided by 50.4 weeks
$660.38
[1] Total gross sales inclusive of GST 1 October 2021 to 30 September 2022 per the Uber and Didi taxation summaries are in a similar amount of $129,986.59. I have adopted the higher figure in the BAS for the claimant’s benefit.
Accordingly, even if PAWE were calculated based on sales declared in the BAS the claimant’s PAWE would be less than my calculation based on the bank statements. As cl 4(1) requires PAWE to be calculated over the period 13 October 2021 to
12 October 2022, I am satisfied that the bank statements are the most reliable means of calculating PAWE over this period.
CONCLUSION
For the reasons set out above I conclude on balance that the claimant’s PAWE is $737.82.
Accordingly:
(a) the reviewable decision is set aside, and
(b) the claimant’s PAWE is $737.82.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· the application, reply and supporting documentation;
· the MAI Act;
· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.
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4
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