3.1.6 Non-pecuniary benefits & amounts in lieu of salary
A worker may receive multiple Non-Pecuniary Benefits (NPB Non-pecuniary Benefit) and other amounts in lieu of salary as part of their total remuneration package (TRP Total remuneration package) with the employer. For claims received by the Agent on or after 1 November 2010, the monetary value of NPBs or other amounts in lieu of salary must be included in the worker’s ordinary earnings to ensure their PIAWE is calculated correctly. If the worker retains the NPB after injury, then the monetary value of the NPB retained (deductible amount) is deducted from the weekly payment amount.
The NBPs that can be included as part of the worker’s ordinary earnings in the calculation of PIAWE are the monetary value of:
- residential accommodation and utilities
- use of a motor vehicle
- private health insurance
- education fees.
Other amounts that the worker receives in lieu of salary that under the worker’s terms of employment, the employer is required to apply or deal with on behalf of the worker in accordance with the worker’s instructions are also included in the worker’s ordinary earnings.
Residential accommodation and utilities
A worker may be provided with accommodation and utilities as part of their remuneration package. If the accommodation is not subject to Fringe Benefits Tax Assessment Act 1986 (FBT Act), the monetary value is the amount that would reasonably be payable for that accommodation or equivalent accommodation in the same area, if it were let on commercial terms, at a weekly rate. To find the value for the latter, Agents need to search a relevant real estate guide for rental properties of similar location and size to that provided to the worker by the employer.
The average rental price of that accommodation calculated as a weekly amount is the monetary value of the NPB to be included in the calculation of the worker’s ordinary earnings.
Accommodation not exempt from FBT
If the accommodation is subject to the FBT Act, then the monetary value of the accommodation is the taxable value as a fringe benefit for the purposes of the FBT Act, expressed as a weekly amount. The employer will have this information as it forms part of the annual payment summary for the previous year. The worker may also be able to provide this information.
Use of motor vehicle
Vehicle as part of remuneration package
If a worker has the use of a motor vehicle as part of their TRP, then the monetary value of the motor vehicle is the taxable value as a fringe benefit for the purposes of the FBT Act, expressed as a weekly amount. The employer will have this information as it forms part of the annual payment summary for the previous year. The worker may also be able to provide this information.
Vehicle as tool of trade expense
If the worker is provided a vehicle as a ‘tool of trade’ and they contribute towards the cost for private use, this will still attract FBT even though the contribution is made after tax. The weekly amount that the employer deducts from the worker’s weekly pay after tax (that is the worker’s contribution towards the use of the vehicle) is the monetary value of the NPB that is to be included in the worker’s ordinary earnings.
This information will be provided by the worker or employer in the form of a payment summary (this may be weekly, fortnightly, monthly or annually). The taxable value of the vehicle will be outlined in the worker’s payment details as an after tax deductible amount.
Private health insurance
If the employer is paying the cost of private health insurance on behalf of a worker as part of their total remuneration package, then the monetary value of the NPB is the taxable value of the insurance, as outlined in the worker’s total remuneration package as a pre-tax amount, expressed as a weekly amount. This amount is to be included in the worker’s ordinary earnings. This information will be provided by either the worker or employer in the form of the annual payment summary.
Education fees
If the employer pays education fees on behalf of a worker as part of their total remuneration package, the monetary value of the NPB is the total cost of the education fees, as outlined in the worker’s total remuneration package as a pre-tax amount, expressed as a weekly amount. This is to be included in the worker’s ordinary earnings. This information will be provided by either the worker or employer in the form of the annual payment summary.
Amounts in lieu of salary (salary sacrifice)
A worker’s ordinary earnings must also include amounts that are paid by the employer on behalf of the worker to another party. Such payments are for the performance of work by the worker and are directed to the other party at the worker’s instructions. This is often called salary sacrifice.
To be included in the worker’s ordinary earnings, documentation is required to show that it is part of the worker’s TRP.
Voluntary contributions into a superannuation fund
A worker may voluntarily sacrifice part of their income into a nominated superannuation fund. This is over and above the employer’s obligation to pay superannuation guarantee contributions on behalf of the worker and is usually made before tax.
If a worker has arranged for their employer to pay voluntary superannuation payments over and above the superannuation guarantee amount (currently 9.5%) the total amount of the worker’s contribution to superannuation will be included in the calculation of the worker’s ordinary earnings as a weekly amount.
The value of the worker’s superannuation contribution will be outlined in the worker’s TRP as a pre-tax amount. This information can be provided by either the worker or employer in the form of the annual payment summary. The Agent needs to make sure that the amount does not include the employer compulsory superannuation guarantee obligation. The Agent should confirm what portion of the superannuation amount is the employer contribution and what amount is the worker’s voluntary contribution (if any).
Other items
The most common form of 'other' payment, apart from superannuation, will be where a worker purchases items and services from their pre-tax salary (known as salary sacrifice) and receive the balance as their normal salary. These items and services can include a wide range of other items such as equipment, professional memberships and subscriptions.
If the worker is employed by a not for profit organisation, these items may also be exempt from fringe benefits tax.
Generally the worker will nominate an amount from their weekly wage to be paid to a third party for the purposes agreed to between them and their employer. This amount will show up as gross deduction from their weekly wage.
Evidence must exist to confirm that the item was included as part of a remuneration package for the performance of work and the monetary value of the item. This may be outlined in the worker’s TRP as a pre-tax amount. This value must be calculated as a weekly amount in the PIAWE calculation. This information will be provided by either the worker or employer and may be on the annual payment summary, (PAYG summary) or as part of an employment contract.