Shqau v AAMI

[2022] NSWPICMR 6

CERTIFICATE OF DETERMINATION OF MERIT REVIEWER

CITATION:

Shqau v AAMI [2022] NSWPICMR 6

CLAIMANT:

Agron Shqau

INSURER:

AAMI

MERIT REVIEWER:

Maurice Castagnet

DATE OF DECISION:

7 February 2022

CATCHWORDS:

MOTOR ACCIDENTS- Merit review; dispute about the amount of weekly payments of statutory benefits under Division 3.3 of the Motor Accident Injuries Act 2017 (MAI Act); calculation of pre-accident weekly earnings (PAWE) under Schedule 1 clause 4(1) of the MAI Act; gross earnings of self-employed painter and decorator; sole trader; treatment of business expenses including “instant asset write-off”; JobKeeper Payments as gross business income; Held – the reviewable decision is varied.

DETERMINATIONS MADE: 

The reviewable decision concerns the amount of weekly payments of statutory benefits that are 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.     The claimant’s pre-accident weekly earnings (PAWE) is determined to be $1,772.44.

3. The insurer is to apply PAWE of $1,772.44 when determining the claimant’s entitlements under Division 3.3 of the Act.

4.     The effective date of this decision is 16 August 2021.

Statement of Reasons

INTRODUCTION

1. There is a dispute between the claimant, Agron Shqau and the insurer concerning the amount of weekly payments of statutory benefits that are payable to the claimant under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).

BACKGROUND

1. The claimant is a 42-year-old man who was injured in a motor accident on 15 August 2021.

2. At the time of the accident, the claimant was a self-employed painter and decorator. On 20 August 2021, he made a claim to the insurer for weekly payments of statutory benefits for loss of earnings arising from that employment.

3. On 13 September 2021, the insurer accepted liability for making weekly payments for the first 26 weeks.

4. On the same date, the insurer notified the claimant it had calculated the claimant’s pre- accident weekly earnings (PAWE) in the amount of $1,245.63 and that his weekly payments will be based on his PAWE, subject to the usual reductions imposed by the Division 3.3 of the MAI Act.

5. The claimant disagreed with the insurer’s calculation of his PAWE. On 15 September 2021, he sought an internal review of that aspect of the insurer's decision.

6. On 29 September 2021, the insurer issued a determination varying its original decision by re-calculating the claimant’s PAWE in the amount of $1,369.12.

7. The claimant disagreed with that re-calculation.

1. On 3 November 2021, he made an application to the Personal Injury Commission (the Commission) seeking a review of the insurer’s review decision.

2. That application is now before me for determination.

DOCUMENTS AND INFORMATION

1. 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 have also considered further information and oral submissions received from the parties at a teleconference on 17 January 2022.

THE DISPUTE

1. There is no dispute between the parties that the claimant is an earner within the meaning of Schedule 1, clause 2(a) of the MAI Act and therefore entitled to weekly payments of statutory benefits under Division 3.3.

2. To determine the weekly amount payable, the parties agree that the claimant’s PAWE should be calculated by applying the provision in Schedule 1, clause 4(1) of the

   MAI Act.

1. To calculate the PAWE by applying that provision, the parties agree that the business income reported by the claimant in his Taxation Return for the financial year ending 30 June 2021 (the 2021 tax return) is appropriate to determine the claimant’s gross earnings during the 12 months immediately before the date of the accident.

2. Conceptually, the parties also agree that expenses incurred by the business should be deducted from the business income to arrive at the claimant’s gross earnings received from the business.

3. The only issue in dispute between the parties is about how the business income and business expenses reported in the 2021 tax return, should be treated to determine the claimant’s gross earnings for the purpose of clause 4(1).

SUBMISSIONS

1. The insurer says it interpreted the claimant’s business income in the 2021 tax return to be $84,088. To arrive at the claimant’s PAWE, the insurer says that it deducted all the business expenses of $12,702 reported in the tax return to arrive at the claimant’s gross earnings from the business of $71,386. That sum was then divided by 52.14 weeks to yield the amount of $1,369.12.

2. The claimant takes a different view about both the amount of business income that should be included and the amount of business expenses that should be deducted to arrive at his gross earnings for the calculation of his PAWE.

3. First, the claimant says the JobKeeper payments that the business received and reported in the 2021 tax return in the amount of $10,500 should be included in his business income.

1. Secondly, the claimant says not all the business expenses reported for taxation purposes in his 2021 tax return should be deducted from his total business income for the purpose of arriving at his gross earnings for the calculation of his PAWE.

2. The claimant says that the insurer should only have deducted “variable” business expenses. Certain “fixed” expenses should not have been deducted. For this proposition, the claimant relies on the findings in the Merit Review decision of Aktop v Allianz Insurance [2021] NSWPICMR 33 (Aktop). In that matter, the Merit Reviewer considered that certain “fixed” business expenses should not be deducted to arrive at the gross earnings for the calculation of PAWE of a self-employed taxi driver.

3. The claimant submits in his case, the reported business expenses of $12,702 include “an instant asset write-off” of $8,328 for the motor vehicle purchased by the business in the 2021 financial year. This is a “fixed expense” that should not have been included in the business expenses deducted to arrive at his gross earnings from the business.

4. The claimant submits that all the motor vehicle expenses of $1,811 should also be characterised as “fixed expenses” except for the petrol expenses incurred in the amount of $85.

5. The claimant does not dispute that the remaining business expenses of $2,564 should be deducted to arrive at his gross earnings from the business for the purpose of Schedule 1, clause 4(1). In summary, he says that the total business expenses that should be deducted for that purpose is the amount of $2,649 ($2564 + $85).

RELEVANT LEGISLATION

1. It is appropriate to set out the relevant legislative provisions.

1. Clause 3 of Schedule 1 provides:

3 Meaning of “loss of earnings”

(1)Loss of earnings means a loss incurred or likely to be incurred in a person’s income from personal exertion.

(2)A person’s income from personal exertion 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.

(3)     …

1. Clause 4 of Schedule 1 provides:

4 Meaning of "pre-accident weekly earnings"--general

(1)"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.

(2)     … (2A) …

(3)     …

(4)     …”

CONSIDERATION

1. The motor accident occurred on 16 August 2021. A strict application of Schedule 1, clause 4(1) would therefore require that the claimant’s PAWE be calculated on the basis of his gross earnings from 16 August 2020 to 15 August 2021.

2. In this matter, the parties have agreed to calculate the claimant’s PAWE based on his 2021 tax return, that is, gross earnings earned from 1 July 2020 to 30 June 2021.

   I consider that there is no utility in disturbing the parties’ agreement in that regard, particularly in circumstances where they are in agreement that the claimant is an “earner” for the purpose of clause 2(a) of Schedule 1, and that he is eligible to receive weekly payments of statutory benefits.

3. The claimant has claimed weekly payments of statutory benefits for his loss of earnings.

1. Clause 3 (1) of Schedule 1 says that this is a loss that has either been incurred or likely to be incurred in a person’s income from personal exertion.

2. The claimant’s income from his personal exertion as a painter and decorator, has been derived from the proceeds of a business carried out by him alone, that is, as a sole trader. Clause 3(2)(b) of Schedule 1 is satisfied.

1. In the claimant’s circumstances, the income that he receives as an individual from the proceeds of the business is an amount net of the business expenses incurred in producing that income.

2. Business expenses incurred in the amount of $2,564 for items such as paint brushes and the like, are expenses incurred by the claimant in deriving his income from personal exertion and should be deducted.

3. In my view, it does not follow that all business expenses claimed by the business as eligible tax deductions should also be treated as expenses incurred by the claimant in producing his income from personal exertion.

4. I do not consider an “instant asset write-off” of a motor vehicle as an asset of the business for the purpose of receiving a taxation deduction by the business is an expense incurred by the claimant in producing his income from personal exertion.¹

5. I therefore find that the instant asset write-off deduction referred to in the claimant’s 2021 tax return is not to be included as a deduction in the business income to arrive at the claimant’s gross earnings.

6. I do not accept the claimant’s submission that the expenses incurred by the business for registering the motor vehicle should also be excluded. In my view, all expenses incurred in operating the motor vehicle are expenses incurred by the claimant in producing his income from personal exertion and should be deducted to arrive at his gross earnings as an earner.

7. As to the issue of whether the JobKeeper payments of $10,500 received by the business and reported in his 2021 tax return should be treated as gross business income, I make the following observations.

8. The JobKeeper scheme was a wage subsidy program announced by the Prime Minister on 30 March 2020 to help keep Australians in jobs in the face of the economic impact of the coronavirus.

9. According to the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), a business can be entitled to a JobKeeper payment of $1,500 per fortnight for one business participant who is actively engaged in operating the business.

1 This taxation deduction is fully explained on the Australian Taxation Office website at

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In this case, the claimant as a sole trader, qualified as a business participant under rule 12 for that payment. In his 2021 tax return, the claimant declared that the business received $10,500 of such payments in that financial year.

I consider that the total amount of the JobKeeper payments is an amount received as a subsidy by the claimant in carrying on his business, within the meaning of clause 3(2)(c) of Schedule 1 of the MAI Act. I find that the amount of $10,500 should be included as part of the gross business income.

In conformity with section 7.13(1) of the MAI Act, my role is to decide what the correct and preferable decision is, having regard to the material before me and any applicable written or unwritten law. I have made my findings based on the facts and circumstances of the matter before me. It was not necessary for me to rely upon the findings made by the Merit Reviewer in Aktop. As the Merit Review himself noted, merit review decisions are not binding precedents.

There have been different approaches taken by Merit Reviewers in determining the “gross earnings” of self-employed claimants for the purpose of calculating their PAWE under the MAI Act, reflecting the different facts and circumstances of individual claimants. The terms of Schedule 1 to the MAI Act are wide enough to encompass those different approaches.

Applying the above findings to the information found in the claimant’s 2021 tax return, I calculate the claimant’s PAWE as follows:

Gross business income	$86,290
JobKeeper payments	$10,500
Gross proceeds of business	$96,790
Less motor vehicle expenses	-$1,811
Less other business expenses - paint brushes and the like	-$2,564
Total Business expenses	-$4,375
Net proceeds of business	$92,415

Claimant’s individual gross earnings from the business $92,415

1. Applying the claimant’s gross earnings of $92,415, I find the claimant’s PAWE is

   $1,772,44 ($92,415 divided by 52.14 weeks).

CONCLUSION

1. The reviewable decision is varied.

1. The claimant’s PAWE is determined to be $1,772.44.

1. The insurer is to apply PAWE of $1,772.44 when determining the claimant’s entitlements under Division 3.3 of the MAI Act.

2. The effective date of this decision is 16 August 2021.

1. The claimant was self-represented. The issue of legal costs does not arise.

Merit Reviewer Maurice Castagnet Motor Accidents Division

Personal Injury Commission