The 3x Earnings Cap: How the Civil Liability Act Limits Loss of Earnings Claims

Most people involved in a personal injury claim understand that they can claim for the wages they have lost as a result of their injury. What is less well understood is that those wages are subject to a cap.

Under the Civil Liability Act 2002, there is a statutory limit on the amount of gross earnings that can be taken into account when calculating a plaintiff's economic loss. This cap can significantly affect the outcome for higher-income earners, and it operates in a way that is not always clearly explained.

What the Cap Is

Section 12 of the Civil Liability Act 2002 sets out the maximum earnings that can be considered in a loss of earnings assessment.

In simple terms, the court must disregard any amount by which the claimant's gross weekly earnings would, but for the injury, have exceeded three times the average weekly earnings at the date of the award.

The average weekly earnings figure used for this purpose is the All Persons Total Weekly Earnings for New South Wales, as estimated by the Australian Statistician and published by the Australian Bureau of Statistics.

As at 16 May 2025, the NSW average weekly earnings figure was $1,592.70. Multiplying by three gives a maximum allowable weekly earnings figure of approximately $4,778.10.

This means that if a plaintiff was earning more than $4,778 per week before their injury, the excess is excluded from the loss of earnings calculation entirely.

Why the Cap Exists

The cap reflects a policy decision that compensation for economic loss should not be unlimited. The legislature has set a ceiling based on three times the average wage, on the basis that awards above that level represent a form of economic loss that is beyond the ordinary scope of the compensation system.

This does not mean that high-income earners have no claim. It means that the earnings component of their claim is assessed as if their weekly earnings were capped at that maximum figure.

How the Cap Is Applied

The cap applies to the assessment of both past loss of earnings and future loss of earnings.

For past loss, the correct cap for each relevant period must be applied, because the maximum allowable figure changes each time the ABS updates its average weekly earnings data, which occurs every six months.

For future loss, the current cap is typically applied, though assumptions about future wage growth and how the cap itself will increase over time may also be relevant in long-term projections.

The cap applies to gross weekly earnings, not net earnings. The forensic accountant must then apply the appropriate tax treatment to arrive at the correct after-tax loss figure.

Superannuation and the Cap

An important nuance is how the cap interacts with the superannuation component of a claim.

Superannuation contributions are calculated on the ordinary time earnings of the employee. If the cap limits the earnings that can be claimed, it may also effectively limit the superannuation loss that can be claimed for earnings above the threshold.

This interaction requires careful analysis and should not be assumed without checking the specific circumstances of each matter.

Common Misunderstandings

There are two common errors that arise in relation to the earnings cap.

The first is using the wrong average weekly earnings figure. Because the ABS data is updated every six months, the cap changes regularly. Applying an outdated figure leads to an incorrect maximum.

The second is applying the cap inconsistently across the past and future loss periods. Each period should reflect the cap that applied at the relevant time or, for future loss, the current cap with any applicable adjustments.

How DB Forensic Handles This

At DB Forensic, we identify the correct average weekly earnings figure for each relevant period, calculate the applicable cap, and apply it consistently across past and future loss assessments.

Where a plaintiff's pre-injury earnings exceed the cap, we clearly document the applicable maximum and explain how the capped figure has been used. This ensures the report is transparent and can be readily understood by all parties.

Questions About the Earnings Cap in Your Matter

If you are preparing or reviewing a damages assessment for a high-income plaintiff and want to make sure the earnings cap has been correctly applied, DB Forensic can help.

Speak to DB Forensic About Your Matter