ACC Levies If You Are Self-Employed
Aug 15, 2018
ACC provides personal injury cover for all New Zealand citizens, residents and temporary visitors to New Zealand. ACC uses a risk-based classification system where business activities are grouped so the costs of work injuries are fairly distributed among similar businesses. ACC sets levies for each group by comparing costs of previous claims with total earnings within that activity group.
Whether you are a self-employed person or shareholder employee or an employer, you are required to pay ACC levies.
ACC COVERPLUS
ACC have named their levies for self-employed people ‘ACC CoverPlus’. This is the standard ACC product. If you have an injury covered by ACC and proof of loss of earnings, ACC will provide you with weekly compensation based on 80% of your previous year’s earnings, or if you are newly self-employed, you would receive the minimum (ACC can provide the latest figures).
ACC CoverPlus levies are based on the amount you received from self-employment in the previous financial year. ACC gathers this information from the annual tax return filed for you with Inland Revenue Department.
ACC INVOICES
From about November each year ACC will start to send out invoices to self-employed people. These will be for the current financial year but based on the earnings information obtained from IRD for the previous tax year.
For example, the ACC invoice you receive in November 2018 will be for levies for the year 1 April 2018 to 31 March 2019. However it will be based on the income earned in the year from 1 April 2017 to 31 March 2018.
If there is a significant drop in income from one year to the next there is no provision for ACC to change the basis on which they have calculated this levy. Their reasoning is that if you have an accident, your compensation will be based on the previous year’s earnings – therefore that is what you are billed on.
Your ACC invoice will include the following components:
– Work levy (covers weekly compensation, rehabilitation and medical costs)
– Earner Levy (this covers non-work injuries)
– Working Safer Levy
When you receive this invoice it is important that you check that the liable earnings you have been assessed on are the same as the profit declared in your financial statements for the previous financial year. In the case of a partnership, the liable earnings will be equivalent to your share of the partnership earnings. You also need to check the Classification Unit as this will determine at what rate your ACC Levies are calculated. We can help you with this.
MIXED EARNERS
A mixed earner is a self-employed person who derives income from salary or wages from employment and earnings from self-employment. These earnings might include:
– gross earnings as an employee
– a shareholder-employee salary
– self-employed income
– active partnership income
For example, an orthopaedic specialist who works for the DHB and who also has a private practice would fall into this category.
ACC is unable to identify these mixed earners as individual wage details are not provided to ACC. If you fit into this category please let us know as soon as possible as we need to determine whether your income takes you over the annual maximum earnings. If so, we will obtain a Summary of Earnings from Inland Revenue and advise ACC that this situation applies to you. ACC will then review your account and confirm the correct levy for your non-PAYE earnings.
ISSUES FOR SELF-EMPLOYED AND NON-PAYE SHAREHOLDERS
Under the standard ACC scheme (ACC CoverPlus or ACC Workplace Cover) there are a number of complicating factors that result in loss of certainty for many shareholder employees and self-employed people when they have an accident.
One of the biggest problems is that there is no guarantee as to what cover you will receive while you are unable to work. ACC will want to know that your accident has caused a financial loss to your business. If you are unable to prove this (for example, maybe the price you are receiving for your goods or services has increased over the last year and your income was going to be up anyway), ACC may require you to pay back any compensation they have advanced to you.
There is also an abatement provision. This means that as soon as you start to return to work – even if only for a few hours a day, the compensation you receive will start to reduce based on the number of hours you work in the business.
However, if you are self-employed or a non-PAYE shareholder, ACC CoverPlus Extra may provide a better alternative.
OUR RECOMMENDATION
Navigating ACC can be complex. We can assist you with managing the whole process. If you are interested to find out more about ACC CoverPlus Extra and would like to discuss the options please contact us.