Pechimuthoo v AAI Limited t/as AAMI
[2022] NSWPICMR 29
•8 April 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Pechimuthoo v AAI Limited t/as AAMI [2022] NSWPICMR 29 |
| CLAIMANT: | Krishnan Pechimuthoo |
| INSURER: | AAI Limited t/as AAMI |
| MERIT REVIEWER: | Maurice Castagnet |
| DATE OF DECISION: | 8 April 2022 |
| CATCHWORDS: | MOTOR ACCIDENTS- Dispute about the amount of weekly payments of statutory benefits payable under section 3.8, Division 3.3, Part 3 of the Motor Accident Injuries Act 2017 after the second entitlement period (after 78 weeks); claimant is an Australian resident employed as an auditor; insurer erred in calculating the net weekly payment for the claimant’s loss of earning capacity; Held- reviewable decision varied. |
| DETERMINATIONS MADE: | The reviewable decision concerns the amount of weekly payments of statutory benefits payable under Division 3.3 of the Act, and is therefore a merit review matter under Schedule 2, clause (1)(a) of the Act. 1. The reviewable decision is varied. 2. Pursuant to sub-section 3.8(2)(a) of the Act, the claimant’s weekly payment of statutory benefits is $1,152.80. 3. The effective date of this decision is 17 December 2021. 4. The claimant was self-represented in the proceedings. The issue of legal costs does not arise. |
Statement of Reasons
INTRODUCTION
There is a dispute between the claimant, Krishnan Pechimuthoo and the insurer concerning the amount of weekly payments of statutory benefits payable to the claimant under section 3.8, Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).
BACKGROUND
The claimant is a 49-year-old man who was injured in a motor accident on 17 June 2020.
At the time of the accident, the claimant was employed as an internal auditor. On 17 June 2020, the claimant made a claim to the insurer for weekly payments of statutory benefits for loss of earnings.
The insurer accepted liability and the claimant received weekly payments of statutory benefits for the first 78 weeks after the accident.
The insurer calculated the claimant’s pre-accident weekly earnings (PAWE) in the amount of $1,844.
The insurer’s determination of PAWE was accepted by the claimant and the insurer made weekly payments on that basis, subject to the usual reductions imposed by the Division 3.3 of the MAI Act.
On 1 October 2021, the amount of the claimant’s PAWE was increased in line with indexation at the rate of 0.4% to $1,851.
On 31 January 2022, the insurer notified the claimant that the amount of his weekly payments after the second entitlement period (after 78 weeks) will be reduced to
$1,031.80, calculated on the basis of 80% of an “Indexed PAWE” of $1,851 less “ATO Tax” of $449 ($1,480.80 less $449 = $1,031.80).
On 2 February 2022, the claimant sought a review of the decision. He contended that the weekly payment should be $1,480.80. The claimant submitted that this was in accordance with the ruling of the Commissioner for Taxation that weekly payments up to week 78 are payments for loss of earnings and for that period the insurer may withhold tax from the weekly payments. After 78 weeks, the insurer should not withhold tax from his weekly payments of statutory benefits because those benefits were now regarded as a capital asset rather than income.
On 11 February 2022, the insurer issued a determination affirming its original decision.
On 16 February 2022, the claimant made an application to the Personal Injury Commission (the Commission) seeking a review of the insurer’s review decision.
That application is now before me for determination.
DOCUMENTS AND INFORMATION
In making my determination, I have considered the documents and submissions provided to the Commission by the claimant in his application and by the insurer in its reply.
I am satisfied that I have sufficient information before me to determine the matter on the papers.
THE CLAIMANT’S SUBMISSIONS
In his submissions to the Commission, the claimant revised his position concerning the issues in dispute.
The claimant now accepts that his weekly payments after 78 weeks are paid as a net figure after income tax.
However, the claimant submits that the insurer has incorrectly calculated the net figure by deducting $449. The amount of $449 represented a tax amount with a ‘no tax-free threshold’. He has one job as an internal auditor. He is an Australian resident for tax purposes, and he is entitled to claim the tax-free threshold which is $18,200.
On that basis, the claimant submits that his weekly payment of statutory benefits should be $1,152.80 ($1,480.80 – less tax of $328 = $1,152.80).
THE INSURER’S SUBMISSIONS
The insurer submits that based on the decision of Allianz v Jenkins [2020] NSWSC 412, the insurer is to pay the claimant’s weekly payments after the second entitlement period on a “net” weekly loss of earning capacity with no PAYG Tax remitted to the Australian Taxation Office.
The insurer says that Allianz v Jenkins is authority for the proposition that weekly payments under section 3.8 are a capital asset and not income, as they are related to a loss of earning capacity rather than a loss of income. As such, these payments are not taxable.
The insurer points to an oversight in its original decision and says that the claimant was incorrectly advised that his weekly payments were calculated after 78 weeks by a reference to “ATO tax”. The correct advice should have been that the payments were made in a net amount with no tax being withheld by insurer.
Nevertheless, the insurer submits that the net amount of the claimant’s weekly payments of $1,031.80 was correctly calculated by the insurer.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
·The MAI Act;
·Motor Accident Guidelines 2017 (Version 8) (the Guidelines), and
·Motor Accident Injuries Regulation 2017 (the Regulation).
CONSIDERATION
Under Part 3, Division 3.3 of the MAI Act, an injured person is entitled to receive weekly payments of statutory benefits in respect of loss of earnings and loss of earning capacity.
The MAI Act provides for three separate periods of entitlement from the date of the motor accident.
The first 13 weeks is the first entitlement period. The second entitlement period is from weeks 14 to 78. The third period is from week 79.
A weekly payment of statutory benefits payable during the first and second entitlement periods is based on the claimant’s loss of earnings.
The insurer has made applicable weekly payments to the claimant for his loss of earnings during the first and second entitlement periods in accordance with the provisions of ss 3.6 and 3.7 of the MAI Act.
According to s 3.8 of the MAI Act, a weekly payment of statutory benefits payable in the third period is the difference between the claimant’s pre-accident earning capacity and his post-accident earning capacity (if any) after the second entitlement period.
Section 3.8 relevantly provides :
“3.8 Weekly payments after second entitlement period (after week 78)
(1)A person who is injured as a result of a motor accident and suffers a total or partial loss of earning capacity as a result of the injury is entitled to weekly payments of statutory benefits under this section after the end of the second entitlement period…
…
(2)A weekly payment of statutory benefits under this section is to be at the rate of--
(a)in the case of total loss of earning capacity – 80%, or
(b)in the case of partial loss of earning capacity – 85%,
of the difference between the person's pre-accident earning capacity and the person's post-accident earning capacity (if any) after the second entitlement period.
…”
(emphasis added)
Although not directly expressed in the review decision, it is apparent that the insurer has determined that the claimant’s pre-accident earning capacity for the purposes of s
3.8 is in the same amount as the claimant’s PAWE of $1,851.
Although the review decision does not specifically state that the claimant has no post- accident earning capacity in the third period (after 78 weeks), it is apparent that the insurer has made that determination because it has proceeded to make weekly payments of statutory benefits to the claimant in accordance with sub-s 3.8(2)(a) of the MAI Act. (See for example paragraph 2 on page 4 and paragraph 3 on page 5 of the review decision).
The dispute is about what should the amount be.
In the third period, in accordance with s 3.8 of the MAI Act, a weekly payment of statutory benefits is payable based on the claimant’s loss of earning capacity. The payment is treated as damages and therefore expressed as a net figure as it is not subject to tax. (See Allianz Insurance Ltd v Jenkins [2020] NSWSC 412).
The evidence reveals that in calculating and advising the claimant of the net figure, the insurer appears to have contradicted itself on more than one occasion.
On page 4 of the review decision dated 11 February 2022,1 the internal reviewer refers to a “letter” sent to the claimant on 3 February 2022. That letter is now before the Commission.2 It does not refer to the claimant’s postal address. Only the word “email” appears below the claimant’s name. In view of this application being made by the claimant to the Commission on 16 February 2022, I have some doubt whether this “email letter” was actually sent or received by the claimant.
It is therefore appropriate for the purposes of this review to refer to the contents of the letter in full. It is headed “Payment Adjustment” and it reads as follows:
“Between 24 October 2021 and 19 January 2022, we paid you the sum of
$12,631.78 for your weekly benefits.
Our records show that the weekly benefit calculation was incorrect resulting in an
1 (R 1).
2 (R 5).
underpayment. We have calculated your entitlement during that period was
$18,763.20.
We have calculated your back payment as follows:
Period: 27/10/21 - 15/12/21 (8 weeks)
Weekly benefit entitlement: $1480.80 gross per week x 8 = 11, 846.40
Claimant paid: $902.27 gross per week x 8 = $7,218.16
That is a shortfall of $4,628.21
Period: 16/12/21 - 19/01/22 (6 weeks) Post 78 weeks
Weekly benefit entitlement: $1,152.80 nett per week x 6 = $6,916.80 (emphasis added)
Claimant paid: $902.27 nett per week x 6 = $5,413.62
That is a shortfall of $1,503.18
The above payments have been processed and we apologise for any inconvenience.
If you require further information or clarification, please contact our office on 02 8261 4669.”
It is clear from the contents of this letter that well before the review decision was made on 11 February 2022, the insurer had accepted that the claimant’s weekly payment entitlement after 78 weeks should be the net figure of $1,152.80. Yet, the internal reviewer proceeded to make a determination that the net weekly payment should be
$1,031.80.
Yet again, and despite providing this letter to the Commission as a document upon which the insurer relies, the insurer’s submission to the Commission on 8 March 2022 was that the internal reviewer was correct in making a determination of a net figure of
$1,031.80.
Given the above circumstances, I promptly conclude that the insurer’s review decision was incorrect based on its own evidence, and the review decision should be varied.
Applying the individual tax rate for Australian residents found on the Australian Tax Office website and using the “Weekly Tax table” also available on that website, I have confirmed that the correct amount of income tax applicable for a weekly gross wage of
$1,480.80 should be $328. This results in a net weekly payment of $1,152.80.
Pursuant to sub-s 3.8(2)(a) of the MAI Act, I find that the claimant is entitled to weekly payments of statutory benefits of $1,152.80 during the third period (after 78 weeks).
CONCLUSION
The reviewable decision is varied.
Pursuant to sub-s 3.8(2)(a) of the MAI Act, the claimant’s weekly payment of statutory benefits is $1,152.80.
The effective date of this decision is 17 December 2021.
The claimant was self-represented in the proceedings. The issue of legal costs does not arise.
Maurice Castagnet Merit Reviewer
Personal Injury Commission
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