Wages Definition Manual - 30 June 2021 icare Workers Insurance
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Wages Definition Manual 30 June 2021 icare Workers Insurance
Disclaimer
This publication may contain work health and safety and workers compensation information.
To ensure you comply with your legal obligations you must refer to the appropriate legislation.
Information on the latest laws can be checked by visiting the NSW legislation website
(www.legislation.nsw.gov.au).
This publication does not represent a comprehensive statement of the law as it applies to
particular problems or to individuals or as a substitute for legal advice. You should seek
independent legal advice if you need assistance on the application of the law to your situation.
Contents
Introduction............................................................................................................................3
Chapter A – Meaning of ‘remuneration’..........................................................................5
Chapter B – icare’s interpretation in relation to particular payments....................7
Chapter C – Directors’ fees and payments................................................................... 19
Chapter D – Trust distributions...................................................................................... 20
Chapter E – Meaning of ‘worker’.................................................................................... 22
Chapter F – Meaning of Deemed workers................................................................... 24
Chapter G – Contractors................................................................................................... 25
Chapter H – Apprentices and trainees......................................................................... 27
Chapter I – Record-keeping requirements & Premium Reviews............................ 29
Important information
Paragraphs preceded by a number in the Wages Definition Manual are variously
referred to throughout the manual as ‘rules’. These rules provide guidance as to
what is included in remuneration and how the provisions are generally applied for
workers’ compensation insurance purposes.
The two main Acts referred to in the Wages Definition Manual are:
• Workers Compensation Act 1987 (the 1987 Act)
• Workplace Injury Management and Workers Compensation Act 1998
(the 1998 Act).
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For further information on how premiums are calculated, refer to icare’s website
http://www.icare.nsw.gov.au
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Introduction What can you use this manual for?
You can use this manual to help you determine
The purpose of this manual is to provide a
whether a particular payment is to be counted as
guide to employers, accountants, auditors and
‘remuneration’ for the purposes of assessing the
other interested parties, on remuneration taken
employer’s premium. See Chapter B, which sets out
into account for the purposes of assessing an
icare’s interpretation in relation to many different
employer’s workers’ compensation premiums.
types of payments.
It aims to help ensure there is a consistent
Whether a payment is remuneration for the
approach to the declaration of remuneration.
purposes of workers’ compensation is set out in
This consistency will help make sure that each
the 1987 Act and the 1998 Act. The purpose of this
employer covered for workers’ compensation
manual is to provide general information about the
insurance administered by icare pays the correct
legislation and how icare interprets it.
amount of premium.
Where a payment to a worker is made in lieu Why is this manual needed?
of wages (regardless of the terminology used
The manual deals with the definitions of
to describe that payment) then the payment is
‘remuneration’ and ‘worker’ and some related
counted as remuneration for the purposes of
administrative matters e.g. record keeping and
calculating workers’ compensation premiums.
resolving disputes.
Many of the payments covered by the 1987 Act
under the definition of ‘wages’ are not of the type What is an employer’s premium
that might be generally thought of as wages –
based on?
for example, the definition includes ‘any other
consideration in money or money’s worth given to Each employer’s workers’ compensation premium
the worker’ under a contract of service or a training is based on various things, including:
contract. For this reason, icare uses the term • the industry in which the employer operates
‘remuneration’.
• the amount of remuneration the employer pays
This edition supersedes the June 2018 edition. to its workers
• for those employers who are experience-
How the system works adjusted the cost of any claims made by their
icare collects workers’ compensation premiums workers. For a definition of an experience-
from employers to cover the costs associated with adjusted employer go icare’s website http://
work-related injuries and diseases. This includes www.icare.nsw.gov.au.
payment of benefits to an injured worker, to cover
Some employers are no longer required to obtain
them for the loss of wages, medical and other
a workers’ compensation insurance policy for their
health related treatment, rehabilitation and lump
workers. If the employer pays, or expects to pay,
sums for permanent disabilities.
$7,500 or less in annual remuneration during a
financial year then they are not required to hold a
policy.
However, if an employer engages apprentices or is
a member of a Group for workers’ compensation
purposes, they are still required to take out a
workers compensation insurance policy, regardless
of the amount of annual wages paid. This also
applies to employers whose NSW Workers
Compensation Industry Classification (WIC) is
subject to per capita rates (e.g. Taxi Drivers (shifts/
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No. of plates), Boxers (bouts) and Harness Racing
jockeys (drives)).
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Remuneration includes wages and other amounts Improving this manual
such as allowances, fringe benefits, superannuation
icare welcomes comments on this manual and any
and payments made to contractors who are
suggestions as to how it might be improved. We
deemed to be workers.
will then update it as required.
Penalties may apply if an employer provides
incorrect wage declarations or fails to take out Any questions?
a policy, if not an exempt employer, when their
wages exceed $7,500 in a financial year. If you have any questions about this manual, please
contact icare’s Customer Service Centre at:
Why is the level of weekly compensation Phone: 13 44 22
benefits different to what an employer Email: wisupport@icare.nsw.gov.au
declares as remuneration? Postal
Payments of weekly compensation benefits to an Address: GPO Box 4052, Sydney, NSW 2001
injured worker are calculated in accordance with
If you are an employer wishing to dispute
the 1987 and 1998 Acts.
the assessment of your premium, refer to the
Weekly benefits form only one element of workers’ information on disputes in Chapter I.
compensation benefits that an injured worker may
be entitled to receive. Depending on the nature and
severity of their injury, they may receive medical
and other health-related treatments, rehabilitation,
medication for their injury, or be entitled to a lump-
sum payment for a permanent impairment.
The relevant legislation
This manual sets out the criteria icare applies
in determining the amount of remuneration an
employer must declare. icare also uses the same
criteria for the purposes of:
• considering an employer’s request for a review
regarding the payments included in a worker’s
remuneration.
• considering an employer’s understatement
of wages. See section 174 of the 1987 Act
• considering an employer’s possible evasion of
correct premiums. See sections 175 and 175A
of the 1987 Act. For non-insurance, see sections
155 and 156 of the 1987 Act.
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Chapter A – Meaning of a. includes salary, overtime, shift and other
allowances, over-award payments, bonuses,
‘remuneration’ commissions, payments to working directors
(including payments as directors’ fees),
payments for public and annual holidays
Many of the payments covered by the 1987 Act
(including loadings), payments for sick leave,
under the definition of ‘wages’ are not of the type
value of board and lodging provided by
that might be generally thought of as wages –
the employer for the worker and any other
for example, the definition includes ‘any other
consideration in money or money’s worth given
consideration in money or money’s worth given to
to the worker under a contract of service or a
the worker under a contract of service or a training
training contract
contract. For this reason, icare uses the term
‘remuneration’. b. includes payment (whether by way of
commission, fee, reward or otherwise) under
What is this chapter for? a contract (whether referred to as a contract,
agreement, arrangement or engagement) by
An employer’s premium is calculated on the basis
reason of which the person paid is deemed by
of ‘remuneration’ paid to ‘workers’. So the meaning
Schedule 1 to the 1998 Act to be a worker, after
of each of those terms is crucial. This chapter deals
deducting such amount for costs necessarily
with ‘remuneration’.
incurred by that person in performing that
Worker is explained in Chapter E. contract as may be agreed on or, in default
of agreement, as may be determined by the
This chapter covers the general principles in Authority, and
relation to ‘remuneration’. The detailed list of icare’s
interpretation in relation to particular types of c. includes payments for long service leave
payments is in Chapter B. However, because of the (including a lump sum payment instead of
complexity involved in each of the following areas, long service leave and any payment under the
there is a separate chapter for: Building and Construction Industry Long Service
Payments Act 1986) or the Contract Cleaning
• directors – see Chapter C Industry (Portable Long Service Leave Scheme)
• trusts – see Chapter D Act 2010, and
• superannuation – see Chapter A & B d. includes a payment made in consequence of
the retirement from, or termination of, any
• deemed workers – see Chapter F
office or employment of a worker, being:
• contractors – see Chapter G
i. a lump sum payment paid before or after
• apprentices, trainees and government training that retirement or termination in respect of
programs – see Chapter H. unused annual leave, or unused annual leave
and a bonus, loading or other additional
What payments are counted as payment relating to that leave, or
remuneration? ii. an amount paid in respect of unused long
The 1987 Act defines ‘wages’ broadly. service leave, or
iii. an amount paid in respect of unused sick
Generally, a payment to a worker is ‘remuneration’
leave, and
if it is made to, or for the benefit of, the worker.
e. includes the amount that is the employer’s
What is the definition of ‘wages’ in the fringe benefits taxable amount (within the
meaning of the Fringe Benefits Tax Assessment
1987 Act?
Act 1986 of the Commonwealth) in respect of
Section 174 (9) of the 1987 Act defines wages as fringe benefits payable to the worker, and
follows
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f. includes a superannuation benefit, being money
wages in relation to a worker- paid or payable by the employer in respect of
the worker:
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i. to or as a superannuation fund within a. there is a wages shortfall in respect of work
the meaning of the Superannuation done for the trust by the worker
Industry (Supervision) Act 1993 of the
Commonwealth, or b. the distribution is made in the financial year
in which the work is done or in the following
ii. as a superannuation guarantee charge financial year.
within the meaning of the Superannuation
Guarantee (Administration) Act 1992 of the 4. There is a wages shortfall in respect of work
Commonwealth, or done for the trust by the worker if the total
wages (if any) paid or payable to the worker
iii. to or as any other form of superannuation, during the financial year in which the work
provident or retirement fund or scheme, is done is less than the wages that would be
including a wholly or partly unfunded fund payable to the worker for that work if wages
or scheme, and were payable at the market rate for that work
(with the difference constituting the wages
g. includes a distribution to a worker as
shortfall for the purposes of subsection (5)).
beneficiary under a trust that is required to be
included as wages by Section 174AA, and 5. If the distribution does not exceed the wages
shortfall in respect of the work, the whole of
h. does not include: the distribution is in lieu of wages for work
iv. directors’ fees (except to the extent that done for the trust by the worker. Alternatively,
these fees are payable to working directors if the distribution exceeds the wages shortfall in
and are included as wages under paragraph respect of the work, the distribution is in lieu of
(a)), or wages to the extent of the shortfall.
v. compensation under this Act, or 6. For the purpose of determining whether a
particular distribution is in lieu of wages for
vi. (vii) any GST component in a payment to a
work done for the trust, the total wages (if
worker.
any) paid or payable to the worker during a
See Chapter B for the detailed list of icare’s financial year for the work is taken to include
interpretation in relation to particular types of any previous distribution (whether made during
payments. that financial year or the following financial
year) that, by application of this section, is a
distribution in lieu of wages for the same work.
Inclusion of trust distributions as wages
7. The market rate for work is the minimum wage
Section 174AA of the 1987 Act states the following
rate applicable in respect of the work (or work
1. A distribution to a worker as beneficiary under that is comparable to the work):
a trust constitutes wages for the purposes of
section 174 to the extent that the distribution is a. pursuant to an industrial instrument in force
in lieu of wages for work done for the trust by under a law of the State
the worker.
b. if paragraph (a) does not apply, pursuant to
2. Work that constitutes the provision of services an industrial instrument in force under a law
to the trustee of a trust, or for the purposes of a of the Commonwealth
business conducted by the trustee of a trust, is
c. if neither paragraph (a) nor (b) applies, as
work done for the trust.
provided by the Workers Compensation
3. This section applies in respect of distribution to Guidelines or as determined and notified by
a worker only if: the Authority in the particular case.
See Chapter D for more information on trust
distributions.
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Chapter B – icare’s Allowances and expenses (see details
under the headings about various types
interpretation in relation of allowances and expenses)
to particular payments Allowances and expenses can generally be
separated into two broad categories, those which
(Supplement to section 174 (9) of the 1987 Act) are intended to reimburse actual expenditure
incurred by a worker as part of their employment
How do you use this list? (e.g. tool allowance, travelling allowance, meal
allowance etc) and those which relate in some way
The list in this chapter sets out icare’s interpretation to the nature or location of the work itself (e.g.
as to what is remuneration (and what is not) as height allowance, shift allowance, skills allowance
applied to many particular types of payments. etc).
In the list, you can look up the type of payment Although the terms allowances and expenses
about which you need guidance and then apply are sometimes interchangeable, the following
icare’s interpretation to your situation. principles generally apply regardless of the
terminology applied to the payment:
You need to bear in mind that it is impractical for
this manual to deal with every particular type of • Any ordinary amount paid as part of wages
payment an employer might ever make to, or in under an Award which are intended to
relation to, a worker or a deemed worker. reimburse actual expenditure incurred by a
worker as part of their employment (such
In unusual cases, not covered by this manual: as tool allowance, travelling allowance, meal
• Employers should contact icare for advice. allowance etc) is not counted as remuneration.
• If an employer disputes what is included as • Any ordinary amount paid as part of wages
remuneration, icare will assess the matter under an award paid to a worker as part of
consistent with the law and the principles their employment which relate in some way
outlined in this manual. This manual provides to the nature or location of the work itself
guidance about icare’s interpretation of the law. (such as height allowance, shift allowance, skill
allowance, etc) is counted as remuneration.
• Unless stated otherwise (e.g. fringe benefits)
the gross amount is counted as remuneration. • Any payment greater than the Award rate is
counted as remuneration.
The following is a summary of common
remunerations payments and shows if the payment • Any consideration subject to fringe benefits tax
is to be counted as remuneration. is counted as remuneration.
• Where there is no applicable Award or
Adoption leave industrial instrument the entire payment is
counted as remuneration unless indicated
Adoption leave payments are counted as
otherwise in the following notes. Further,
remuneration.
where a payment is made having no regard to
an actual expense being incurred, the entire
Advancement of salary payments payment is counted as remuneration.
Payment in advance of salary or any other Award means any industrial instrument within
entitlements is counted as remuneration. the meaning of the Industrial Relations Act
1996, any agreement with respect to salaries or
wages entered into between an employer and a
union under any other NSW law, and any other
award, agreement or other instrument under a
Commonwealth, State or Territory law.
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Annual leave and public holiday Car allowances and expenses
payments (including loadings) Payments made in accordance with an Award
Annual leave and public holiday payments are or industrial instrument that represent a
counted as remuneration. Lump sum payments reimbursement of actual expenses incurred by
on termination for annual leave are counted as a worker as part of their employment, are not
remuneration, including payments made on the counted as remuneration. However, any payment
death of a worker. greater than the award rate is counted as
remuneration.
Apprenticeship Schemes In instances where a payment is made having no
See Chapter H. regard to the actual expenses incurred, the entire
payment is counted as remuneration.
Australian Construction Industry Where there is no applicable Award or industrial
Redundancy Trust (ACIRT) instrument, any payment up to the nominated
cents per kilometre rate as regulated by SIRA is not
Payments to the Australian Construction Industry counted as remuneration. However, any payment
Redundancy Trust (ACIRT), known previously as greater than the nominated cents per kilometre
the Construction Employees Redundancy Trust rate is counted as remuneration.
(CERT), are not counted as remuneration.
Further information in calculating the extent to
See Termination payments for further information. which motor vehicle allowances are excluded from
wages are published on icare’s website https://
Board and lodging www.icare.nsw.gov.au/employers/premiums/
premium-updates/
If the employer provides free or subsidised
board and lodging to the worker as part of their See ‘Company car’, ‘Fringe benefits’ and
conditions of employment (whether expressed ‘Allowances and expenses’.
or implied) then the benefit is counted as
remuneration. Remuneration is the relevant market
value of the total value of the board and lodging.
Charities, churches and public
benevolent institutions
See ‘Housing’ and ‘Fringe benefits’.
All fringe benefits provided to workers are counted
as remuneration.
Bonuses
Charities, churches and public benevolent
Bonuses are counted as remuneration.
institutions may have different fringe benefit
thresholds. These organisations should maintain
Building and Construction Industry Long with their wage records the appropriate fringe
Service Leave Scheme benefit thresholds for their organisations.
Certain payments made under the Building and Worker benefits that are not subject to fringe
Construction Industry Long Service Payments Act benefits tax, that is they are less than the relevant
1986 are counted as remuneration. Australian Tax Office (ATO) fringe benefit
threshold, should be counted at the net value.
Long service leave payments made directly to
workers in the building and construction industry Once the workers’ benefits exceed the ATO fringe
by their employers are counted as remuneration. benefit threshold then the employer must declare
The amount to be counted is the payment to the those fringe benefits at the grossed-up value. That
worker less the reimbursement receivable from the is, the portion of the benefit that exceeds the ATO
Building and Construction Industry Long Service threshold (called the non- exempt amount by the
Leave Corporation in respect of those payments. ATO) must be declared at the grossed-up value
and the portion of the benefit that is below the
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Payments made on benefits accrued before 30
threshold should be declared at the net value (i.e.
June 2003 and paid after that date is counted as
actual value of the benefit).
remuneration.
See ‘Fringe benefits’ and ‘Rebatable employers’.
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Childcare expenses Company car – private use of
If the employer pays the worker’s childcare If an employer provides a worker with a car,
expenses, then the payment is counted as including a worker’s private use of a car or through
remuneration. any type of leasing arrangements for private use,
the benefit is counted as remuneration.
See ‘Fringe benefits’ and ‘Allowances and
expenses’. See also ‘Car allowances and expenses’ and ‘Fringe
benefits’.
Cleaning Industry Portable Long Service
Leave Scheme Company house (market value of rental)
The Cleaning Industry Portable Long Service Leave See ‘Housing’.
Scheme, established under the Contract Cleaning
Industry (Portable Long Service Leave Scheme) Compensation payments
Act 2010, commenced on 1 July 2011 and is funded
See ‘Workers compensation payments’.
by quarterly levies that are payable by employers
to the Long Service Leave Corporation.
Construction allowances
Long service leave payments made directly to
Construction allowances are counted as
workers in the cleaning industry by their employers
remuneration whether or not they are paid in
are counted as remuneration. The amount to be
accordance with an Award or industrial instrument.
counted is the payment to the worker, less the
Allowance types include; productivity, height,
reimbursement receivable under the Cleaning
foreman, wet day, leading hand, dirty work, shift,
Industry Portable Long Service Leave Scheme from
skill, heat and cold and site allowances.
the Long Service Leave Corporation in respect of
those payments.
Contractors – deemed to be workers
Payments made on benefits accrued before 1 July
2011 and that are paid after that date are counted See Chapter G.
as remuneration. The quarterly levy is not counted
as remuneration. Credit card expenses
Payment of personal expenses with an employer
Clothing supplied credit card that are not subject to
If the employer pays for or reimburses the worker reimbursement by the worker is counted as
for clothing expenses that the worker incurs as remuneration.
part of their employment, then the payment is not
See ‘Fringe benefits’.
counted as remuneration. In any other case, the
payment is counted as remuneration.
Directors’ fees and payments
See ‘Uniform allowance’, ‘Fringe benefits’ and
See Chapter C.
‘Allowances and expenses’.
Dirt money
Commission(s)
Dirt money is counted as remuneration.
Commissions are counted as remuneration.
Distant work allowance
Community Development Employment
Project (CDEP) See ‘Living-away-from-home allowance’.
Remuneration an employer pays to workers in the
CDEP is counted as remuneration for the purposes
Dividends
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of calculating an employer’s premium. However, See Chapter C.
the other costs funded by the Project are excluded
(e.g. costs for equipment and rental).
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Domestic worker’s payments The fifth year employee does not work but receives
the 20 per cent that has been put aside throughout
Wages, salary, fringe benefits, superannuation
the previous four (4) years, this payment is not
and/or any other consideration provided by an
counted as remuneration.
employer for a domestic worker are counted as
remuneration under the Workers’ Compensation
policy. Free housing
See ‘Housing’.
Early retirement benefits
See ‘Termination payments’. Fringe benefits
Generally, if a non-cash component of a worker’s
Employee share schemes remuneration is considered taxable under the
Fringe Benefits Tax Assessment Act 1986 then, for
Any benefit in money or money’s worth received
the purpose of calculating the employer’s premium,
by a worker or their family members under
it is counted as remuneration.
an employee share scheme is counted as
remuneration if the payment or remuneration For more information about specific items
(shares, share options, dividends, trust distributions attracting fringe benefits, see the relevant headings
etc) is made in lieu of wages or classified as a fringe in this list.
benefit under the Fringe Benefits Tax Assessment
Act 1986 (Commonwealth) At what value?
For any fringe benefit, the amount that is to
Entertainment expenses be counted as remuneration is the value of the
If the employer pays for or reimburses the worker benefits calculated using the ‘taxable value of
for entertainment-related expenses and the fringe benefits’ ending 31 March in the particular
payment is subject to fringe benefits tax, then premium policy year, as specified in the Fringe
payment is counted as remuneration. Benefits Tax Assessment Act 1986. The value of
the benefits provided is the total of the Type 1 and
See also ‘Fringe benefits’ and ‘Allowances and Type 2 aggregate amounts multiplied by the Type 2
expenses’. gross up rate applicable at the time (available from
the Australian Taxation Office (ATO) website).
Fares
For example, a $2000 gym membership would be
See ‘Travel allowance’. valued at the grossed-up taxable amount which
is $2000 x the relevant FBT grossed-up formula
First aid allowances amount.
First aid allowances are counted as remuneration. When a policy is cancelled mid-term, the benefit
declared should be calculated on a pro-rata basis
Flexible work package payments having regard to the period elapsed.
(pre-purchased leave arrangements) When a business ceases to operate, the employer
Any wages, salary and any other consideration in should declare the value of the benefit up to the
money or money’s worth the employer provides date of ceasing the business as per the employer’s
to a worker as part of a ‘flexible work package FBT return.
arrangement’ are counted as remuneration.
What if the benefit is available to all of an
Payments made to a worker whilst on a flexible employer’s workers?
work leave arrangement are not counted as
Any fringe benefits that are available to workers as
remuneration.
an incidental benefit of employment are counted as
For example, five (5) year package, first four (4) remuneration.
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years employee works and receives 80 per cent of
See ‘Charities, churches and public benevolent
salary and 20 per cent is held by employer, 100 per
institutions’ and ‘Rebatable employers’.
cent of remuneration is counted.
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Gifts For the purposes of this exclusion, government
programs include but are not limited to the
If an employer provides a gift to a worker and it
“JobKeeper payment”, the “Aged Care Retention
is subject to fringe benefits tax, then the gift is
Bonus” and the “Council Job Retention Allowance”.
counted as remuneration. Bonuses and incentive
awards are counted as remuneration. Example: A part-time worker whose usual weekly
earnings are $500 may take annual leave and
See ‘Fringe benefits’.
receive the full $750 JobKeeper payment during
that leave period. As the worker was entitled
Goods and Services Tax (GST) to receive $500 under their usual employment
The Goods and services tax component of any arrangements, $500 of the $750 paid to the worker
payment paid to a worker, or a contractor who is a is considered wages for premium purposes and
deemed worker, is not counted as remuneration. $250 must be excluded from wages for premium
purposes.
Government funded allowances to 2. COVID payments made to workers not working
support retention of staff during An insurer may exclude from wages any payment
COVID-19 pandemic (other than a payment subsidised by a government
The State Insurance Regulatory Authority (SIRA) program described in 1 above) made to a worker
has determined that: who performed no work during the period to which
the payment relates but only if the payment was
1. Payments subsidised by government a type of payment that is temporary in nature and
COVID programs made to support workers during the COVID-19
pandemic.
An insurer must exclude from wages any payment
(or any part of any payment) made to a worker by Example: An insurer may exclude a temporary paid
an employer if the insurer is satisfied that: leave entitlement for workers who are required to
i. the employer was provided funds to self-isolate because they contract or are exposed to
make the payment (or the employer was COVID-19.
reimbursed for the payment) under a
government program established to Government training schemes, Group
support workers and employers impacted apprentice Schemes and Government
by the COVID-19 pandemic; and
training subsidies
ii. the worker was not entitled to receive the
See Chapter H.
payment under their ordinary employment
arrangements, for example the payment
was not a payment for work performed Height money
or a paid leave entitlement. Height money is counted as remuneration.
The insurer must exclude from wages any amounts
received by a worker that have been paid under Honorariums
a relevant government program, to the extent of Honorariums to volunteers or non-workers are not
the difference between the amount of the funds counted as remuneration. Volunteer workers are
provided to the employer to make the payment (or generally not covered for workers’ compensation.
the amount of the reimbursement) and any amount However, employers may still be liable for any
the worker was entitled to receive during the injuries to volunteers. Employers should check with
period to which the payment relates, for example icare to ensure they have the appropriate coverage.
wages for work performed. However, should an employer elect to pay wages to
This exclusion applies to all policies in force for a worker so that they may volunteer, or take leave
any period during which relevant government to volunteer, the wages paid to the worker for the
period the worker takes leave/undertakes volunteer
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programs were being administered, irrespective of
policy issue date. activities are counted as remuneration.
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Housing and Housing Loans Test D: in the case of a worker working on a ship,
if no single State/Territory is identified
Generally, housing payments, including company
by Test A, Test B or Test C: a worker’s
house, free housing and housing loans, are counted
employment is, while working on a ship,
as remuneration. Remote housing allowances are
connected with the State/Territory in
not counted as remuneration.
which the ship is registered or (if the ship
The following payments are counted as is registered in more than one jurisdiction)
remuneration: the State/Territory in which the ship most
recently became registered, or
• the current market rental value of a company
house less any amount the worker pays for the Test E: If no single State/Territory is identified by
right to occupy the premises Test A, B, C or D (if applicable), a worker’s
employment is connected with a State/
• the amount of temporary accommodation,
Territory if the worker is in that State/
associated with relocation, that is assessable
Territory when an injury happens to that
for fringe benefits tax
worker and there is no place outside
• the taxable value of a housing loan that is Australia under the legislation of which the
offered to a particular worker as part of worker may be entitled to compensation
their salary package and is subject to for the same matter.
fringe benefits tax.
Wages, salary, fringe benefits and/or any other
consideration provided by an employer for a
Income splitting worker who has a NSW ‘State of Connection’ is
Fringe benefits and/or any other consideration, in counted as remuneration against the employer’s
payment for work done by a worker and provided NSW workers’ compensation policy.
by an employer to a person other than the worker
as part of an income -splitting arrangement, is JobCover Placement Program
counted as remuneration, with the exception of
trust distributions If an employer engages a previously injured
worker under the JobCover Placement Program,
then the wages the employer pays that worker
Interstate workers are not counted as remuneration for the first 24
Workers compensation insurance requirements months of that person’s employment subject to the
vary throughout Australia. Employers must verify conditions contained in the ‘JobCover Placement
with the relevant State or Territory authority the Program Guidelines’. The guidelines are available
legislative requirements of that State or Territory. on the State Insurance Regulatory Authority (SIRA)
website http://www.sira.nsw.gov.au/.
The cross-border provisions contained in the 1987
Act determine in which jurisdiction the worker is
entitled to claim compensation. Jury duty payments
Payments made by the Court to a worker for jury
A worker’s ‘State of Connection’ is determined
duty attendance are not counted as remuneration.
by a cascading series of tests as follows:
Return travel and meal allowances included in
Test A: the State/Territory in which the worker jury fees paid by the Court are not counted as
usually works in that employment, or remuneration. Employers are obligated to pay
full time and permanent part-time employees for
Test B: if no single State/Territory is identified by the first 10 days of jury duty, which is counted as
Test A, the State/Territory in which the remuneration. If a juror reimburses their employer
worker is usually based for the purposes the allowance received from the court, because
of that employment, or the employer has paid their normal wages, only the
normal wages paid to the worker by the employer
Test C: if no single State/Territory is identified
are counted as remuneration.
by Test A or Test B, the State/Territory in
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which the employer’s principal place of
business in Australia is located, or
© icareTM | Insurance and Care NSW 2021 12 of 32 Wages Definition Manual
Laundry allowance Loan payments
If the employer pays for or reimburses a worker for Repayment of loans to working directors/working
laundry related expenses that the worker incurs as beneficiaries/workers which are commercially
part of their employment, then the payment is not based, legally documented and subject to taxation
counted as remuneration. In any other case, the are not counted as remuneration.
payment is counted as remuneration.
Otherwise the payment of loan amounts to
See ‘Fringe benefits’ and ‘Expenses and working directors/working beneficiaries/workers
allowances’. are assessable as remuneration based on the
hours worked and the type of work performed.
Lease payments The amount is limited to the current market value
of the remuneration that would be paid to a worker
Payment of lease/rent (in whatever form or name) undertaking the same mix of duties and hours
for the provision of premises, equipment etc to of work, and with the same skills, together with
working directors/working beneficiaries/workers any allowances or other remuneration paid to the
which are commercially based, legally documented working director/working beneficiary/worker for
and subject to taxation are not counted as employee-related duties for the industry relevant
remuneration. Otherwise the payment of rent to to the work performed, for the relevant period.
working directors/working beneficiaries/workers
is counted as remuneration.
Long service leave
Leave loadings Payments for long service leave, including lump
sum payments, are counted as remuneration.
Leave loadings and lump sum payments of leave
loadings are counted as remuneration. See ‘Building and Construction Industry Long
Service Leave Scheme’ and ‘Cleaning Industry
Portable Long Service Leave Scheme’.
Living-away-from-home allowance
If the employer pays for or reimburses the worker
Lump sum payments in lieu of holiday,
for living-away-from-home allowance that the
worker incurs as part of their employment (for sick leave (and the like)
items such as accommodation or meals and Lump sum payments in lieu of holidays, sick leave
incidental expenses, such as telephone costs) and (and the like) including leave loadings and bonuses,
the payment is subject to fringe benefits tax then are counted as remuneration.
the payment is counted as remuneration.
The living-away-from-home allowance is usually Management fees
paid where the worker has relocated for work Management fees paid to working directors,
purposes. For the treatment of allowances paid working beneficiaries and workers for employment
to a worker where the worker is temporarily away related activities are counted as remuneration.
from their principal place of residence see travel
allowance. See also Chapter C.
See ‘Travel allowance’, ‘Fringe benefits’ and
‘Allowances and expenses’.
Maternity leave payments
Maternity leave payments are counted as
remuneration.
See ‘Paid parental leave’.
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Meal allowance An incorporated worker from overseas who
works in NSW must take out their own workers’
If the employer pays an amount intended to
compensation policy. Wages, salary, fringe benefits
reimburse a worker’s meal related expenses,
and/or any other consideration to the incorporated
or pays for or reimburses the worker for meal
worker is counted as remuneration towards their
related expenses, in accordance with an award at
workers’ compensation policy.
a rate specified by the award, then the payment
is not counted as remuneration. However, any
payment greater than the award rate is counted Overseas workers
as remuneration. Where the meal expense is part (from NSW, working overseas)
of a ‘living-away-from-home allowance or a travel
Wages, salary, fringe benefits and/or any other
allowance, refer to that section of this manual.
consideration provided by an employer to any
In any other case, the payment is counted as
worker who is normally based in NSW, while
remuneration.
that worker is temporarily employed or working
See ‘Fringe benefits’, ‘Entertainment expenses’ overseas, is counted as remuneration. This is to
and ‘Allowances and expenses’. apply whether the payments are made within or
outside Australia. Employers should also verify
with the relevant overseas authority the legislative
Mechanical and Electrical Redundancy requirements of that country.
Trust (MERT)
Where a NSW employer engages a worker to
MERT payments are not counted as remuneration.
work overseas, then the employer must incept a
See ‘Termination payments’. workers’ compensation policy (or equivalent) in
accordance with the legislative requirements of
that country. Wages, salary, fringe benefits and/
Military leave payments or any other consideration to the worker is not
Military leave payments are counted as counted as remuneration for the NSW workers’
remuneration. compensation policy.
Over-award payments Overtime payments
Any payment over the award rate is counted as Overtime payments are counted as remuneration.
remuneration.
Paid parental leave scheme
Overseas employers The Paid Parental Leave Scheme is a new
An overseas employer who engages workers entitlement for working parents of children who
in NSW must have a NSW workers’ compensation were born or adopted on or after 1 January 2011.
policy. The scheme was established under the Paid
Parental Leave Act 2010 (Commonwealth). Parental
Wages, salary, fringe benefits, superannuation leave pay is available to working parents who
and/or any other consideration an overseas meet eligibility criteria and is fully funded by the
employer provides a worker working in NSW, is Australian Federal Government. Eligible working
counted as remuneration. parents can get 18 weeks of government funded
parental leave pay at the rate of the national
Overseas workers (from overseas, minimum wage.
working in NSW) The 18 weeks of Commonwealth Government
Wages, salary, fringe benefits and/or any funded parental leave pay is not counted as
other consideration an employer provides an remuneration. Any payments in excess of Paid
overseas worker working in NSW, is counted Parental Leave Scheme entitlement are counted
as remuneration. The amount to be counted as remuneration.
WI0229_Wages_declarations_manual_2021_v05
corresponds to the proportion of the wages that
can be attributed to the time the worker is in NSW. All other maternity and paternal leave payments
This applies whether the payments are made within are counted as remuneration.
or outside Australia.
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Parental leave payments Private use of company car
Parental leave payments are counted as If an employer provides a worker with the private
remuneration. use of a company car, then the benefit is counted
as remuneration.
Paternity leave payments See ‘Fringe benefits’ and ‘Company car’.
Paternity leave payments are counted as
remuneration. Public and annual holiday payments
(including loadings)
Payments in lieu of notice
Public and annual holiday payments including
Payments in lieu of notice are not counted as loadings are counted as remuneration.
remuneration.
See ‘Termination payments’. Rebatable employers
All fringe benefits provided to workers are counted
Payments made on behalf of the worker as remuneration.
If the employer spends money on behalf of the Certain employers are deemed Rebatable
worker to the direct benefit of the employment employers by the Australian Taxation Office (ATO).
of the worker (e.g. a computer course, training in These employers should declare payments less
relation to employment) then the payment is not than the threshold amount at the net value and
counted as remuneration. In any other case, the those greater than the threshold amount at the
payment is counted as remuneration. grossed-up value.
See ‘Fringe benefits’. See ‘Fringe benefits’ and ‘Charities, churches and
public benevolent institutions’.
Penalty rates
Penalty rates are counted as remuneration. Redundancy payments
See ‘Termination payments’.
Personal services income
Any personal services income attributed to an Retrenchment payments
individual and not otherwise taken as salary or See ‘Termination payments’.
wages or other non-exempt form of remuneration
is counted as remuneration.
Reward – payment by way of
Payment by way of a reward is counted as
Productivity allowance
remuneration.
Productivity allowances including those paid in the
construction industry are counted as remuneration. See ‘Commission(s)’.
Profit sharing schemes Rollovers and options
Benefits workers receive from profit sharing Payments made for rollovers and options in the
agreements are not usually counted as broadcasting and/or publishing industry where no
remuneration. However, when these benefits additional work activities are undertaken are not
are provided in lieu of wages, then the benefit counted as remuneration.
is counted as remuneration for the purposes of
calculating workers’ compensation premiums. Royalties
Royalty payments are not counted as
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remuneration.
© icareTM | Insurance and Care NSW 2021 15 of 32 Wages Definition Manual
Salary If a share or option granted is classified as a fringe
benefit under the Fringe Benefits Tax Assessment
Salary is counted as remuneration.
Act 1986 (Commonwealth), it is treated as a fringe
benefit for workers’ compensation purposes.
Salary package/sacrifice
For further information refer to the NSW Payroll
Generally, any wages, salary and the value of fringe Tax Act 2007, Division 4, Section 18-26.
benefits and any other consideration in money or
money’s worth the employer provides to workers
as part of a salary package or salary sacrifice
Shift allowance
arrangement, are counted as remuneration. In A shift allowance is counted as remuneration.
the case of fringe benefits, the amount counted
is the taxable value of the benefits according to
Sick leave
the Fringe Benefits Tax Assessment Act 1986. See
specific entries for details of particular benefits. Sick leave is counted as remuneration.
See ‘Flexible work package payments’.
Lump sum payments on termination for sick leave
are counted as remuneration.
Salary protection insurance
Payments made by an employer to a worker under Site allowance
an income protection policy, sickness or accident
Site allowances are counted as remuneration.
insurance policy or salary continuance policy, even
if the worker contributes to the policy premium, are
counted as remuneration. Staff discounts and benefits
Any fringe benefits that are available to workers as
Severance payments an incidental benefit of employment are counted as
remuneration.
See ‘Termination payments’.
See ‘Fringe benefits’.
Share of catch
Where a skipper or crew of a fishing vessel is paid Strike-breaking allowance
by way of ‘share of catch’ then the value of the A strike-breaking allowance is counted as
share of catch is counted as remuneration. The remuneration.
value of remuneration is calculated by multiplying
the agreed percentage (share of the catch) by the
Study leave
sale price of the catch.
Study leave is counted as remuneration.
Shares and Share options
Superannuation payments
Share options are counted as remuneration when
these are made in lieu of wages or classified as Chapter A indicates that Wages “includes a
a fringe benefit under the Fringe Benefits Tax superannuation benefit being money paid or
Assessment Act 1986 (Commonwealth). The payable by the employer in respect of the worker.”
granting of a share or option occurs if a person
Superannuation includes; salary sacrifice amounts
acquires a share, or in the case of an option, a
paid to superannuation on behalf of the worker,
right to the share. A value of the share or option
extra superannuation payments made on behalf of
becomes liable on the relevant day. The employer
the worker and Superannuation Guarantee Levy
can elect to treat the relevant day as either the
payments made on behalf of the worker.
date that the share or option is granted to the
employee or the ‘vesting date’. Note: Superannuation payments made on behalf
of non-working directors are not assessable. See
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Chapter C.
© icareTM | Insurance and Care NSW 2021 16 of 32 Wages Definition Manual
Telephone allowance Tips and gratuities
If the employer pays for or reimburses the worker Tips and gratuities that employers pass on to their
for telephone-related expenses in accordance workers and are included on the worker’s payment
with an award at a rate specified by the award, summary are counted as remuneration.
then the payment is not counted as remuneration.
However, any payment greater than the award rate Tool allowance
is counted as remuneration.
If an employer reimburses the worker for tool-
Where the telephone expense is part of a ‘living- related expenses that the worker incurs as part of
away-from-home allowance or a travel allowance, their employment, then the reimbursement is not
refer to that section of this manual. In any other counted as remuneration. In any other case, the
case, the payment is counted as remuneration. payment is counted as remuneration.
See ‘Fringe benefits’ and ‘Allowances and See ‘Fringe benefits’ and ‘Allowances and
expenses’. expenses’
Termination payments Traineeship schemes
Payments that represent a lump sum payment of See Chapter H.
accrued sick leave, annual leave, including leave
loadings or bonuses, and long service leave, made
Travel allowance
on termination or retirement, are counted as
remuneration, including payments made on the If the employer pays for or reimburses the worker
death of a worker. for travel related expenses that the worker incurs
as part of their employment, then the allowance is
Payments made in lieu of notice on termination not counted as remuneration.
arising from redundancy, severance, retrenchment
or early retirement are not counted as Where the payment is made in accordance with
remuneration. an award at a rate specified by the award, the
payment is not counted as remuneration. However,
Redundancy, severance, retrenchment, early any payment greater than the award rate is
retirement benefits or termination payments (that counted as remuneration.
do not represent accrued sick leave, annual leave,
including leave loadings or bonuses, and long If the employer provides a worker with a travel
service leave) are not counted as remuneration. allowance and the payment is not paid under an
Award, then any payment up to the prescribed
Contributions to the Australian Construction amount per night is not counted as remuneration.
Industry Redundancy Trust (ACIRT), Mechanical If the payment is not under an Award, then any
and Electrical Redundancy Trust (MERT) payment greater than the prescribed per night
or Cleaning Industry Portable Long Service rate is counted as remuneration. Refer to https://
Leave Scheme (CIPLSLS) are not counted as www.icare.nsw.gov.au/employers/premiums/
remuneration. premium-updates/ for the current motor and
accommodation allowances.
Ex gratia payments to workers on termination are
not counted as remuneration. See ‘Fringe benefits’, ‘Living-away-from-home
allowance’ and ‘Allowances and expenses’.
Travelling time
Any payment to a worker for work-related travel
time is counted as remuneration.
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Trust distributions Volunteers
See Chapter D. See ‘Honorariums’.
Uniform allowance Workers’ compensation payments
If the employer pays for or reimburses the worker Any workers’ compensation benefits an employer
for uniform related expenses that the worker incurs pays to a worker including the excess on the
as part of their employment, then the payment is claim which the employer pays are not counted as
not counted as remuneration. In any other case, the remuneration.
payment is counted as remuneration.
However, payments by an employer to an injured
See ‘Clothing’, ‘Fringe benefits’ and ‘Allowances worker over and above the workers’ compensation
and expenses’. benefits paid to workers by the workers’
compensation Scheme Agent are counted as
remuneration.
Working directors’ payments
See Chapter C.
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Chapter C – Directors’ How are dividends treated?
fees and payments Where the company’s constitution provides
for dividend payments to members, including
directors, then the payments are not usually
counted as remuneration.
How are fees to a ‘non-working’ director
treated? However, where a dividend is paid in lieu of wages,
the payment is counted as remuneration for the
Any fees or payments the employer makes to a
purposes of calculating workers’ compensation
‘non-working’ director for performing their duties
premiums.
as a director are not counted as remuneration.
The amount of payment to be included is based on
Non-working director’s duties include attending
the hours worked and the type of work performed.
board meetings, setting strategic goals and
The amount is limited to the current market value
overseeing and reviewing the company’s progress
of the remuneration that would be paid to a worker
towards those goals. A non-working director would
undertaking the same mix of duties and hours
have no involvement in the day-to-day operations
of work, and with the same skills, together with
or perform administrative functions of the business.
any allowances or other remuneration paid to the
Note: Superannuation payments made on behalf director for employee-related duties.
of non-working directors are not counted as
To determine the current market value of the
remuneration.
remuneration, the employer and icare may consider
various sources, including: industrial awards,
How are fees to a ‘working’ director position vacant advertisements relevant to the
treated? general location of the director, salary surveys,
or evidence supplied by recruitment firms or
Any director is considered to be a ‘working’
employment agencies. The amount may be more
director if they are performing work in the day-
than in an industrial award, if activities undertaken
to-day operations of the business, which include
exceed those duties that would be required of a
administrative and management tasks.
worker under that award, for example, making
Where a director is performing work in the day- decisions that relate to the financial, strategy and/
to-day operations of the business and is receiving or management direction of the organisation.
any form of consideration in money or money’s
In the absence of a relevant industrial award being
worth, then there is an implied contract of service
appropriate, icare can rely upon the ‘average
between the director and the company. That is,
weekly full time adult total earnings’ in accordance
the director is a working director and is therefore
with statistical reports compiled by the Australian
a worker for the purposes of NSW workers’
Bureau of Statistics (ABS) together with an
compensation legislation.
allowance for the Superannuation Guarantee Levy.
All payments to a working director (including
allowances, fees, fringe benefits, salary,
superannuation, wages etc) are counted as
remuneration.
Any payment or remuneration (shares, share
options, dividends, trust distributions etc) that
is made in lieu of wages or classified as a fringe
benefit under the Fringe Benefits Tax Assessment
Act 1986 (Commonwealth) should be declared as
wages for workers compensation purposes.
See ‘Fringe benefits’ in Chapter B for information
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on the calculation of the value of the benefits.
© icareTM | Insurance and Care NSW 2021 19 of 32 Wages Definition Manual
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