There have been massive changes in the way ACC Levies are collected and calculated over the last few years. There is certainly a lot of confusion out there as to what levies are payable and when.
As a self-employed person you may pay one or two of three different types of levies – employer levies, shareholder employee levies or self-employed levies. There are various components within these levies – these include Earnings Compensation Cover, Residual Claims Levies, Health and Safety in Employment Levies, and Earner Levies. These are all based on the income that you earn or that you pay to your employees as wages and are payable directly to ACC.
In all cases ACC gets the information they require for billing purposes from Inland Revenue Department. This means that the times at which ACC starts to send out invoices for a particular year is in part driven by when IRD is provided with the earnings information.
As a general rule though: levies for the WorkPlace cover for your employees will arrive after July each year; for shareholder employees after August; and for the self employed after November.
In some cases your invoice may cover a two year period – there may be a wash-up for the previous year (now that ACC have actual earnings) and there may be an invoice for the financial year we are currently in.
It is important to check the various components on your invoices. The two most important are the amount of liable earnings and the classification rate that ACC is applying to your invoice. We can help you confirm these details if necessary. We certainly don’t want you paying any more to ACC than is absolutely necessary.
There may be a way in which we can make the ACC levies you pay for self-employment or as a shareholder employee work better for you.
For self-employed and shareholder employees the standard ACC scheme is called ACC CoverPlus. This will provide you with compensation based on 80% of your previous year’s earnings, or if you are newly self-employed, compensation will be based on the minimum – for example in 2010 you get about $400 per week in the hand (this changes from year to year – ACC can provide the latest figures).
This scheme has a number of complicating factors and does not really provide much comfort and certainty for shareholder employees and self-employed people.
However there is an alternative option for self-employed and shareholder employees in regard to their cover. This alternative ACC scheme is called ACC CoverPlus Extra.
Under this scheme you and ACC enter a contract where you both agree the amount of compensation that you will receive should you have an accident. This amount is then paid on a weekly basis until you are able to return to work full-time.
In many instances we are able to save our clients significant premiums by applying for ACC CoverPlus Extra. If we take a dairy farmer for example: he may have an income of say $80,000. Under ACC CoverPlus, he has to pay ACC levies based on this level of income. He knows however, that if he has an accident, he could hire a farm manager and pay him $40,000 per annum and still maintain his income from the farm. Under ACC CoverPlus Extra, we would then apply for cover of $40,000 and there would be a saving in levies, plus he would have the certainty that if he had an accident, he would be paid on this basis – he would not have to prove loss of earnings to ACC.
Because there are many different types of levies, if you have any queries whatsoever, don’t hesitate to contact your wellington accountant.