Tax Changes and Year-by-Year Projections
The Government’s personal income tax rate reductions Bill has passed both the
lower house and the Senate. The new tax cuts will see the 16% tax rate reduced to 15% from 1 July 2026,
and further reduced to 14% from 1 July 2027. These new tax cuts now affect legal calculations,
especially in the Tort Law area. NetActuary has updated our systems and calculators and is ready
to supply personal injury economic loss reports that take into account these changes. The cost of
these reports remains unaltered.
Future economic loss can be calculated either by using a year-by-year full
projection or by using a multiplier factor approach. We strongly believe a year-by-year projection
is more accurate for a number of reasons. Firstly, a year-by-year projection allows variations to tax
rate and superannuation guarantee levels, while the multiplier approach cannot take these variations
precisely into account. Incorporating tax rate variation has been important in the past when there were
three legislated stages of tax cuts and now continues to be important because of the above-mentioned
tax rate reductions.
Year-by-year projections are also preferable as they allow career progression
to be taken into account while the multiplier approach does not. Legal precedence does not allow a
general inflationary assumption to be incorporated in the calculation methodology. Legislation mandates
that economic loss amounts are discounted at a prescribed discount rate (a real rate of return). However, there
is no legislation that prohibits career progression to be taken into account. Taking career progression
into account has a significant impact on the size of damages claimable.
Take the example of an apprentice electrician that had a serious accident
in year 1 of their apprenticeship. Depending on their award, their earnings would typically be 50%
of an adult wage (higher if they completed year 12). If the multiplier approach is used, they would
lose out on the anticipated increase under the award to 60% in year 2; 70% in year 3 and then 82% in
year 4. This anticipated pecuniary loss can be precisely incorporated in a year-by-year projection. The
year-by-year with career progression has a $$871,411 pecuniary loss while the factor approach using only the
first year wage is $$501,073.
Career progression can be incorporated for multiple different occupations
and awards. NetActuary’s personal injury economic loss reports remain at $440 inclusive of GST and
will not have an increase applied for 2025-2026.