Clark v QBE Insurance (Australia) Limited
[2022] NSWPICMR 51
•8 September 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Clark v QBE Insurance (Australia) Limited [2022] NSWPICMR 51 |
| ClaimanT: | Sean Clark |
| Insurer: | QBE Insurance (Australia) Limited |
| Merit Reviewer: | Katherine Ruschen |
| DATE OF DECISION: | 8 September 2022 |
| CATCHWORDS: | MOTOR ACCIDENTS - Merit review; dispute about payment of weekly benefits under Division 3.3 of the Motor Accident Injuries Act 2017; meaning of loss of earnings: Schedule 1, Clause 3; meaning of post-accident earning capacity; Schedule 1, Clause 8; income from personal exertion; whether a travel allowance is income from personal exertion; whether a travel allowance forms part of post-accident earnings; Held – the reviewable decision is affirmed. |
| Determinations made: | The reviewable decision is about the amount of statutory benefits that are payable under Division 3.3 of the MotorAccident Injuries Act2017 (the MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is affirmed. |
STATEMENT OF REASONS
introduction
Sean Clark (the claimant) was involved in a motor accident on 12 February 2020.
The claimant made a claim for statutory benefits, including payment of weekly payments under Division 3.3 of the MAI Act.
On 6 March 2020, the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $3,447.12. PAWE is not in dispute.
In calculating the claimant’s PAWE the insurer included a site allowance received by the claimant as part of his earnings pre-accident.
The claimant is currently employed with Occupational Health Professionals Pty Limited, and his current salary package includes payment of a travel allowance based on a per kilometre rate.
In calculating the extent to which the claimant has suffered a loss of earnings, if any, for the purpose of payment of weekly payments the insurer determined that the travel allowance payments received by the claimant are part of post-accident earnings when determining post-accident earning capacity.
The claimant contends the travel allowance is reimbursement of expenses and therefore excluded from post-accident earnings for the purpose of determining his post-accident earning capacity and in turn, calculating the extent of any loss of earnings.
The claimant requested an internal review of the decision to include travel allowance payments in post-accident earnings.
On 17 March 2021, the insurer issued their internal review decision in which the insurer affirmed their decision that travel allowance payments form part of post-accident earnings.
The claimant has applied for a merit review of the internal review decision of 17 March 2021.
SUBMISSIONS
The claimant submits:
(a) the travel allowance is different from the site allowance included in calculation of the claimant’s PAWE and therefore inclusion of the site allowance in PAWE is irrelevant, and
(b) the travel allowance is essentially reimbursement of expenses incurred by the claimant to use his vehicle for work purposes and therefore does not form part of his post-accident earnings.
The insurer submits:
(a) regardless of the purpose or type of allowance, allowances were included in PAWE and if the travel allowance were excluded from post-accident earnings it would amount to double dipping by the claimant, and
(b) in any event, the definition of loss of earnings includes allowances and it follows from this that if the allowance has been paid there is no loss.
REASONS
Issue in dispute
There is no dispute that the claimant is an earner or that his PAWE is $3,447.12. There is also no dispute that the claimant has a post-accident earning capacity determined by his post-accident earnings.
The issue in dispute is what payments received by the claimant from his employer are to be included as his post-accident earnings. Specifically, the issue is whether travel allowance payments are post-accident earnings for the purpose post-accident earning capacity under the MAI Act.
The legislation
Relevantly, ss 3.6, 3.7 and 3.8 of the MAI Act provide that “[an] earner who is injured as a result of a motor accident and suffers a total or partial loss of earnings as a result of the injury is entitled to weekly payments of statutory benefits under” the relevant section during the relevant entitlement period calculated in the manner prescribed by the relevant section.
Accordingly, before an earner is entitled to weekly payments under ss 3.6, 3.7 or 3.8 of the MAI Act they must first suffer a “loss of earnings”.
Pursuant to Schedule 1, cl 3(1) of the MAI Act “loss of earnings” means “a loss incurred or likely to be incurred in a person's income from personal exertion”.
Pursuant to Schedule 1, cl 3(2) of the MAI Act “income from personal exertion” for the purpose of “loss of earnings” is:
(a) the amount that is the income of the person consisting of earnings, salaries, wages, commissions, fees, bonuses, pensions, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to any services rendered, and
(b) the proceeds of any business carried on by the person either alone or in partnership with any other person, and
(c) any amount received as bounty or subsidy in carrying on a business.
(emphasis added)
The wording of cl 3(2) does not limit in any way the type of allowances that are classified as income from personal exertion for the purpose of the MAI Act. Accordingly, any allowance received by an earner in their capacity of employee is income from personal exertion for the purpose of the MAI Act.
Where loss of earnings is established in the first and/or second entitlement period weekly payments are calculated based on “the difference between the person's [PAWE] and the person's post-accident earning capacity”, if any under ss 3.6 and 3.7 of the MAI Act.
Where loss of earnings is established after the second entitlement period weekly payments are calculated based on “the difference between the person's pre-accident earning capacity and the person's post-accident earning capacity”, if any.
Pursuant to Schedule 1, cl 8(1) “post-accident earning capacity” means:
(a) for the first and second entitlement periods--the weekly amount that the person has the capacity to earn in the employment in which the person was engaged immediately before the motor accident, determined on the basis of the person's fitness for work in that employment, or
(b) for any period after the second entitlement period--the weekly amount the person has the capacity to earn in any employment reasonably available to the person, determined on the basis of the person's fitness for work in any such employment.
(emphasis added)
It is inherent in the words “the weekly amount the person has the capacity to earn” in cl 8 that where a person such as the claimant generates earnings through a partial (or full) capacity to earn, the amount of earnings received is evidence that they at least have capacity to earn that amount. In relation to the first and second entitlement periods cl 8(2)(c) of Schedule 1 of the MAI Act makes clear that factors determinative of post-accident earning capacity include “any earnings of the person in any employment engaged in by the person after the motor accident”.
Where a person does not realise their post-accident earning capacity (or does not realise their full capacity), cl 8 sets out other factors that are to be used to determine post-accident earning capacity instead of post-accident earnings (if there are no post-accident earnings), or in addition to post-accident earnings (if there are post-accident earnings).
Whether the claimant’s PAWE calculation included site, travel or other allowances is irrelevant to calculation of the amount payable under ss 3.6 and 3.7 as the amount payable is calculated on the difference between PAWE and post-accident earning capacity. PAWE is determined separately, pursuant to different criteria set out in cl 4 of Schedule 1. The claimant’s PAWE has been determined and is not in dispute. The MAI Act does not permit reconsideration of PAWE, or any accommodation being made because of a change in jobs, as is the case here, where the claimant became entitled to other allowances in connection with his post-accident earning capacity that he did not receive in, or for the whole of, the pre-accident period.
Consideration
There does not seem to be any dispute that for the periods in question the claimant’s post-accident earnings represent his post-accident earning capacity.
The dispute is whether the “travel allowance” payments made to the claimant by his employer post-accident are to be included in his post-accident earnings, which in turn determine his post-accident earning capacity.
As noted above, for an entitlement to weekly payments under ss 3.6, 3.7 or 3.8 to be triggered the claimant must suffer a “loss of earnings”. As also set out above, the MAI Act clearly defines “loss of earnings” to mean a loss “in a person’s income from personal exertion”. In turn, the MAI Act clearly states that “income from personal exertion” includes “allowances” received “in the capacity of employee”.
It follows from the definitions of “loss of earnings” and “income from personal exertion” that for the purpose of determining the claimant’s post-accident earning capacity under Schedule 1, cl 8 of the MAI Act, including cl 8(2)(c) that actual post-accident earnings that determine earning capacity must also include those types of payments set out in cl 3(2)(a) as forming part of “income from personal exertion”. This is because the MAI Act is compensatory. It aims to compensate for actual loss. If a loss includes “allowances”, as stated in cl 3(2)(a) of Schedule 1 of the MAI act, the converse of this statement is that if the relevant allowance has been paid by the employer there is no loss. Therefore, to determine whether there has been a loss of earnings one must first assess the amount of earnings received based on the criteria applicable to “loss of earnings” that is, that earnings are income from personal exertion and income from personal exertion includes allowances, as prescribed by cl 3 of Schedule 1. If the difference between PAWE (for the purpose of ss 3.6 and 3.7) or pre-accident earning capacity (for the purpose of s 3.8) and the amount of post-accident earnings (where, the earnings received represent post-accident earning capacity) produces a loss the person may be entitled to weekly payments[1]. The only way to implement the relevant provisions sensibly and consistent with the compensatory nature of the MAI Act, and so that a person does not obtain a windfall, is to include those payments in cl 3(2)(a) such as “allowances” in the calculation of post-accident earnings.
[1] Whether there is in fact an entitlement may depend on whether there are other factors which determine post-accident earning capacity other than or in addition to post-accident earnings.
The claimant may wish to treat the travel allowance as reimbursement of expenses in order to maximise his entitlement to compensation under the MAI Act, but this characterisation is not available under the definition of “loss of earnings” and in maximising the claimant’s entitlement it would extend the MAI Act beyond its compensatory purpose.
There is a clear distinction between “reimbursements” and “allowances” in relation to how income is legally treated, which is made clear by the Australian Taxation Office (ATO) as follows:[2]
(a) Allowances are separately identified payments made to an employee for:
(i)working conditions - for example, danger, height or dirt
(ii)qualifications or special duties - for example, first aid certificate or safety officer
(iii)expenses that can't be claimed as a tax deduction by the employee – for example, normal travel between home and work
(iv)work related expenses that may be claimed as a tax deduction by the employee - for example, travel between work sites.
(b) Reimbursements are payments made to a worker for actual expenses already incurred, and the employer may be subject to fringe benefits tax (FBT). If the reimbursement is covered by FBT, the amount is not assessable income to the employee, and the employee cannot claim a deduction for the expense.
[2] See for example >
The claimant’s payslips record the subject payments from his employer as a “travel allowance” paid based on a per kilometre rate in relation to use of the claimant’s private vehicle for work purposes. As such, it is a motor vehicle allowance. A motor vehicle allowance is paid or payable to an employee to compensate them for any business use of their own private vehicle. The allowance can be paid on a per kilometre basis, as a flat or fixed amount, or a combination of both.[3]
[3] See >
Any such payment is not payment of “actual expenses already incurred” for the payment to be a “reimbursement” rather than an allowance. The allowance is not paid pursuant to specific amounts recorded in receipts for expenses. A per kilometre “allowance” is precisely that – an “allowance” to cover likely or potential expenses that might be incurred in owning and running a vehicle used for business purposes from time to time. As stated by the ATO, an allowance to cover potential or likely expenses and reimbursement of actual expenses incurred are two different concepts for the purpose of income/earnings. An allowance covers likely or potential expenses by way an estimated payment based on a per kilometre rate. Reimbursements on the other hand require that the expense has first been incurred. The specific amount incurred, as recorded in the expense receipt, is then reimbursed by the employer. For example, instead of a travel allowance an employer might reimburse petrol costs incurred upon production of receipts by the employee for the purchase of petrol. However, this is not the claimant’s case. The pay slips make clear that the claimant receives an “allowance” calculated on a per kilometre basis rather than reimbursement of actual expenses incurred in connection with using his vehicle for work purposes.
For reasons set out above, the claimant has a post-accident earning capacity that is determined at a minimum by the amount of income he generated through personal exertion in the relevant post-accident period[4]. Pursuant to Schedule 1, cl 8 of the MAI Act “income from personal exertion” includes “allowances” received “in the capacity of employee”. The payment in question relates to car expenses but does not represent direct reimbursement of actual expenses incurred in connection with use of the claimant’s private vehicle. Instead, the payment is paid to the claimant as an allowance, calculated at a per kilometre rate. If it were a reimbursement, given the employer’s obligation to distinguish between reimbursements and allowances due to their different treatment by the ATO and the fact the employer also pays reimbursements in relation to other expenses, one would expect the payments to be recorded as “reimbursements” rather than an “allowance” in the claimant’s payslips. One would also expect there to be receipts from the claimant against which the payments can be directly reconciled as payment of actual expenses incurred.
[4] Whether the claimant has a post-accident earning capacity that is greater than the amount of his post-accident earnings is not put in issue in this merit review.
However, this is not the case. The employer states the payment is an “allowance” in the payslips, as distinct from other payments recorded in the payslips as “reimbursements”. The claimant received the allowance payments in his capacity of employee. The MAI Act prescribes that any kind of “allowance” received in the capacity of employee is income from personal exertion. Therefore, given the converse of this statement discussed above, as a matter of law under the MAI Act the travel allowance payments are post-accident income from personal exertion and therefore form part of his post-accident earnings. The travel allowance payments therefore cannot be excluded from post-accident earnings and in turn, determination of post-accident earning capacity.
The travel allowance payments therefore form part of the claimant’s post-accident earnings which in turn, determine[5] the claimant’s post-accident earning capacity for the purpose of determining the extent to which weekly payments are payable under Division 3.3 of the Act.
[5] or partly determine, if there are other factors evidencing an earning capacity greater than that demonstrated by post-accident earnings alone.
Conclusion
For the reasons set out above, the travel allowance payments in question represent income from personal exertion and are to be included in calculation of the claimant’s post-accident earnings for the purpose of determining his post-accident earning capacity and in turn, whether there is any difference between PAWE and post-accident earning capacity under ss 3.6 and 3.7 or whether there is any difference between pre-accident and post-accident earning capacity under s 3.8 (whichever section is applicable) in order to determine the extent to which weekly payments, if any, are payable.
I therefore conclude the insurer’s decision to include the travel allowance payments as post-accident earnings is correct. Accordingly, the reviewable decision is affirmed.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· the Application, Reply and supporting documentation;
· MAI Act;
· Motor Accident Guidelines, and
· the Motor Accident Injuries Regulation.
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