Peter Hunt
Principal
CTP Insurance, Insurance
Business Losses and the Calculation of PAWE
18 March, 2024
In Brief
- Where a Claimant runs a business, their pre-accident weekly earnings (PAWE) is the nets proceeds of the business.
- The net proceeds of the business are the income of the business less all the expenses of the business.
- Where the business is running at a loss, the Claimant’s PAWE is $Nil.
Facts
On 15 March 2024, the Personal Injury Commission published its decision in Zou v QBE Insurance (Australia) Limited [2024] NSWPICMR 4.
The Claimant was injured in a motor accident on 14 June 2023. She subsequently made a claim for weekly statutory benefits.
The Insurer accepted that the Claimant was “an earner” as defined by clause 2 of Schedule 1 of MAIA because she was self-employed at the time of her accident. The Insurer, however, calculated the Claimant’s pre-accident weekly earnings (PAWE) at $Nil because her business was running at a loss.
The Claimant applied for Merit Review of the Insurer’s decision.
The Merit Reviewer’s Determination
The Merit Reviewer agreed with the Insurer’s PAWE determination for the following reasons:
- The Claimant was not an employed person, so she had no personal exertion income in the form of a salary or wages.
- As the owner of a business, the Claimant’s PAWE should be based on the “proceeds of the business”.
- Those net proceeds are calculated by reference to the revenue of the business less all the expenses of the business.
- The Claimant’s business was in its infancy when the accident occurred and business expenses exceeded the business’ revenue.
- The Claimant’s PAWE was, therefore, $Nil because the business was running at a loss.
Key Learnings
The Decision in Zou v QBE is a useful reminder of how PAWE is calculated when a Claimant is self-employed.
The PIC has consistently held that net business income is calculated by deducting all business expenses from the revenue of the business. What is left is the profit of the business and this represents the Claimant’s income. If the business is running at a loss than the Claimant has no income and their PAWE is $Nil.
If you have a query relating to any of the information in this case note, or would like to discuss a similar matter of your own, please don’t hesitate to get in touch with CTP Insurance Principal, Peter Hunt, today.
