ACC – Accident Compensation Corporation – How does it all work?

Like the IRD, the Accident Compensation Corporation “ACC” is a large complex and seemingly disjointed organisation given the charter of dealing with insurance premiums for “no-fault personal injury cover” in New Zealand.

For those simply on a PAYE income, not much is seen of ACC unless a claim is made, and this is because the levy for ACC is automatically deducted from your wages by your employer.

Members of the business and investment community will come across ACC in the form of a levy invoice.

Whether you are a self-employed person, a shareholder employee or an employer, you are required to pay ACC levies. There is no ability to ‘contract out’ of the scheme. Levies for businesses fall into the following broad categories:

Cover for
Levy
To provide
EmployerWorkPlace Cover

(Cover for workplace injuries)

cover for your PAYE employees
Shareholder Employeeyou with workplace cover
Self-EmployedACC CoverPlusyou with compensation based on 80% of your previous year’s earnings, in the event of accident or injury

Levies are calculated and invoiced annually, based on:

Cover for
Based on the…
Employergross amount paid to your employees
Shareholder Employeeamount paid to you as a Shareholder Employee
Self-Employedamount received from self-employment in the previous financial year

Initially, employers and shareholder employees generally receive an assessment based on the previous year’s figures. ACC subsequently updates this based on actual earnings for the current year and invoices all businesses for the year:

Cover for
Invoices sent out
Invoice consists of
EmployerFrom July§ ACC WorkPlace Cover Levy adjustment for current income year

§ ACC Residual Claims Levy, including the Health and Safety in Employment Levy

§ Estimated ACC WorkPlace Cover Levy for coming income year

Shareholder Employeefrom August
Self-EmployedFrom November§ Work levy (covers weekly compensation, rehabilitation and medical costs)

§ Earner Levy (this covers non-work injuries)

§ Residual Claims Levy and Health and Safety in Employment (HSE) Levy

§ Earner Residual Levy

Options for Self-employed and non-PAYE shareholders

An option exists for Self-Employed and non-PAYE shareholders to enter into an agreed value policy with ACC. Due to the fluctuating nature of income in such situations an agreed value policy goes you surety of cover, no questions asked.

This policy is unfortunately named very similar to the standard policy, but with an “extra” on the end, so is called Coverplus Extra.

Coverplus Extra also has the added advantages for those in high risk industries such as builders and forestry whereby the administrative staff can have their ACC premium reduced to a rate that more suitably reflects the activity performed and at a lower cost.

Coverplus Extra also enables those with other insurances to package a more comprehensive insurance cover by reducing the amount of the agreed value policy, but supplementing it with other insurance policies provided through your insurance broker.

Issues we come across

Unfortunately, ACC invoices may not always be correct, as they work off a limited and often out of date set of information obtained through their various interactions with governmental departments, the largest being the IRD.

The types of errors that we find are:

  • Wrong classification rates used, resulting in incorrect charging
  • Incorrect liable earnings information
  • Not splitting the income to allow for the different types of work carried out by the various business owners
  • Incorrect charging of levies where changes have been made to the business structure
Other Scenarios

As the ACC work with a limited set of information is it also quite possible that the application of ACC is incorrect if

  • You have multiple sources of employment income, e.g. PAYE and Shareholders salaries

If appropriate, we can be engaged to undertake a review of your ACC Levies to determine whether these are being accurately applied. Or you may simply want us to investigate an invoice received.

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