Registered Nurses | What to look out for when assessing economic loss

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Registered Nurses

By Kain Elsmore 

When assessing loss in relation to Registered Nurses, a simple review of their taxation returns may not provide the full extent of their “salary package”.  The below worked example may provide some guidance in this regard

Facts

Joe is a Registered Nurse.

He works all manner of shifts across a 24 hour / 7 day period and as a result, receives penalty rates which comprise 30% of his total earnings.

Joe salary sacrifices the maximum FBT allowance towards his mortgage repayments.  Additionally, he makes salary sacrificed superannuation contributions equal to 5% of his earnings to increase the superannuation support provided by his employer.

Joe’s personal Income Tax return for the year ended 30 June 2017 included:

Gross Wages$ 60,000
Reportable Fringe Benefits$ 17,000
Reportable Superannuation Contributions$ 4,000

Apparent Earnings

Based on a cursory review of Joe’s personal Income Tax return, it is easy to adopt an amount of $60,000 as his “but for” earnings.

This approach, however, would disregard the value of the other components of Joe’s earnings which (by virtue of his employment) he was able to salary sacrifice.

“True” Earnings

Whilst a cursory review of Joe’s personal Income Tax return may lead to a conclusion of “but for” earnings of $60,000 per year before tax, his “true” earnings are as follows:

Gross Wages$ 60,000
Reportable Fringe Benefits$ 8,670 (grossed-down value)
Reportable Superannuation Contributions$ 4,000
“True” Earnings$ 72,670

In this instance, by simply adopting Joe’s gross wages, you would be ignoring an additional 20% in earnings.

In calculating Joe’s after tax earnings, it should be remembered that (i) no Income Tax is paid on the reportable fringe benefits; and (ii) Contributions Tax of 15% is deducted from reportable superannuation.

That is:

  1. An “average” employee deriving $72,670 per year before tax would “take home” $1,074 per week; whereas
  2. Joe’s opportunity to access salary sacrificing arrangements on the earnings (of $72,670 per year before tax) composed as above provides for “take home” pay of $1,148 per week.

Tips

To sum up:

DO look beyond what the gross wages say.

DO ask your client if they access salary sacrificing arrangements.

DO consider how the components of your client’s earnings are taxed.

DON’T hesitate to pick up the phone and call us and we will be happy to assist.

Want to know more?

With more than 30 years hands-on experience in the assessment of economic loss in personal injuries claims, the team at Vincents can help you accurately assess your client’s notional earnings.  If you would like to know more about registered nurses and what to look out for, please contact Forensic Services Director Kain Elsmore.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

 

 

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