Introduction to ACC
ACC is a unique system that provides a comprehensive injury compensation system to individuals who suffer accidental injuries. ACC for business is a key element in the healthcare system.
ACC generally covers medical costs, rehabilitation costs, and may provide financial assistance of 80% of your usual income while you’re recovering. Because of this businesses are legally required to provide ACC business cover for employees and proprietors.
In both cases your health professional will make a claim on your behalf.
Salary and wage earners have ACC deducted from their pay by their employer, and will rarely have to think about it. People in business will have much more involvement with ACC.
ACC options for self-employed people
If you are self-employed you have two options:
- Cover Plus – standard
- Cover Plus Extra – an option with more control
Self-employed people will automatically be placed on Cover Plus after their first IR3 tax return is filed. On having a workplace accident they will be eligible for financial assistance worth up to 80% of the taxable income in their most recent filed tax return. Full time workers pay for and are covered for a minimum level as set by ACC each year, even if their income was lower. They may elect to state they only work part time to pay for and be covered for a lower amount.
Cover Plus Extra (CPX) is an optional cover product that allows you to choose how much of your income you want to be covered if you have an accident and can’t work. This replaces Cover Plus; the two can’t be combined. After a workplace accident ACC pays compensation based on your agreed cover amount.
CPX is a good option if you have fluctuating income, are newly self-employed, or would like more cover than your income level. The amount of cover you can apply for ranges between $34,679 and $111,507 (as at November 2023), and is benchmarked against similar businesses. The amount of CPX cover will be mutually agreed-upon between yourself and ACC.
Starting a business
When you first start a business you are not covered by ACC as you won’t have filed a tax return for that business activity yet.
If you have an accident within the first year of business, ACC may take your self-employed income and spread this over 12 months to work out your 80% entitlement.
If you are starting a business we suggest applying for ACC Cover Plus Extra so you have certainty about the payments you will receive in case of an accident. We can help with this application process.
Be aware that any late payment of a CPX policy will cause it to be cancelled immediately.
When will I receive my ACC invoice?
ACC will await your financial tax return. Then they tend to issue their invoices from October to November.
What payment options do I have?
If your ACC invoice is under $500 excluding GST, it needs to be paid in one payment by the due date on the invoice.
Invoices over $500 excluding GST can be paid in full, or in 3 or 6 instalments paid monthly.
If you’d like to use an instalment plan you’ll need to let ACC know before the due date by phoning 0800 222 776. Or if you’re a client, you can let us know and we’ll get that arranged.
If you are on National Superannuation
If you are on National Super and you get injured at work, you’ll receive weekly compensation payments as well as NZ Superannuation. However, weekly compensation payments are limited to a two-year maximum per claim from when your compensation payments start.
What ACC do you pay when in business?
There are three levies which will be charged on your invoice:
- Work levy
- Earners’ levy
- Working safer levy
Your invoice total (your Cover Plus levy) will depend on the industry you are working in as well as the amount of income returned to IRD. Just like commercial insurance, high risk industries have higher rates.
Note that if you have two or more business activities, you’ll be paying ACC at the highest rate of all of your activities that make up 5% or more of your total revenue. I.e. if you make $1,000 from being a stunt pilot and $15,000 from being a math tutor, your ACC bill will be based on $16,000 income at the high stunt pilot rate.
Aside from the three levies above, ACC invoices are made up of two components; a final levy for the last filed tax return year, and a provisional levy for the year in progress, plus an adjustment for inflation.
The final invoice will take in to account any provisional levy already paid towards that year. Where income in the filed tax return is lower than expected, this might result in a credit towards the provisional portion, or a refund.
For companies, GST on ACC invoices is often not straightforward. The Earners’ Levy portion of the invoice can’t be claimed as an expense for GST. Please get in touch if you need any help with this.
CPX levies are set as per the amount of cover you and ACC agreed upon.
How ACC assesses what level of financial assistance to pay
ACC takes in to account:
- Your profit or shareholder earnings in the 12 months preceding your injury, or
- Your profit or shareholder earnings in your last tax return
They often take the higher of these two, but may request further information or investigate your income further before making a decision.
For full time workers (working more than 30 hours per week):
The minimum assistance is $726.40 per week
The maximum assistance is $2,257.17 per week
When would you start to receive financial assistance?
Employees, shareholders, and self-employed people will become eligible to receive the minimum full-time weekly compensation rate from one week following your injury.
Wage earners must still be paid 80% of their usual wage by their employer for the week prior to ACC’s financial assistance commencing.
Employers are required to pay this 80% rate and can’t ask the staff member to take leave, even though they’re unable to work. This is an important thing to note: ACC provides financial assistance but the employer is still liable to effectively provide assistance also for that first week.
Have a “hmmm”
If you’re out and about this summer, ACC have an entertaining series of short safety videos. These should get you thinking about your activities to have fun and stay safe!
Please feel free to get in touch with any questions you have.