BUSINESS INSURANCE


ACC





ACC Levies Review 

Paying to much for your ACC levies? Do you want to reduce your ACC Levies and at the same time increase the level of your accident or illness cover?

Everyone in New Zealand is entitled to seek help from ACC if they are injured – no matter what age they are or whether they are working or not. ACC can provide lost earnings compensation of up to 80% of a client’s normal weekly wage if they are off work for more than one week when recovering from an accident.

ACC Levies are compulsory for all self-employed business owners. When you file your tax return with Inland Revenue, they will tell ACC you are self-employed and ACC will send you an invoice after September for your ACC levies (including residual levies), once they have received details of your self-employed earnings from Inland Revenue. How much you pay for your levies is based on your earnings from self-employment and the type of work you do.

ACC have two plans available to self employed people

ACC CoverPlus is ACC’s standard personal injury cover for self-employed people. It automatically applies when you start self-employment. It includes 24-hour no-fault cover for work-related and non-work related personal injuries, including access to the full range of medical treatment and rehabilitation benefits and up to 80% compensation for lost earnings.

The problem is two fold: You are only covered for injury caused by an accident and you are only entitled to 80% of your liable earnings. Liable earnings is the term ACC uses to describe the part of your income from self-employment that is assessable, or you pay tax on (profit/drawings etc.). 

ACC CoverPlus Extra is the tailored ACC cover for self-employed people and non-PAYE shareholder-employees. It is a flexible alternative to ACC CoverPlus which enables you to negotiate your level of lost earnings cover subject to ACC underwriting). That way you know exactly what you’ll receive if you’re injured and can’t work – and it doesn’t matter whether the injury is work related.

Note: The level of ACC cover you have under ACC Cover Plus Extra can be negotiated (with ACC) up or down depending on your circumstances and needs.

ACC CoverPlus Extra is a great option for self-employed people and non-PAYE shareholder-employees:

  • if you work 30 hours or more a week or, if you work part-time, earn an income that’s above the ACC CoverPlus Extra minimum (which changes every year)
  • if your income fluctuates from year to year
  • if your personal income is not a true reflection of your actual earnings. For example, you might split your income with a partner or spouse, or take advantage of options to reduce your tax
  • if your business would continue generating income if you were injured and couldn’t work
  • if you are starting out in your own business and don’t have an income history
  • if you want a guaranteed level of lost earnings compensation.

The problem is: You are still only covered for injury caused by an accident

Quote from Peter Warfield – ACC Account Manager at the IFA Conference  -  July 2007

“5 out of 6 disabilities, that prevent people from working, are from sickness not accident”

The solution is: By reducing their ACC coverage benefits through ACC Cover Plus Extra self employed New Zealanders can apply the savings from the resulting reduced premiums to purchase from a range of specialised private insurance policies that provides a much more comprehensive coverage not only for injury but also cover you for illness, sickness or degenerative disability. 

Example 1:

You are on the default ACC Cover Plus and your business turns over $150,000 per year but for various reasons your taxable income (drawings) is only $20,000. 

  • If you suffer an injury and are unable to work your ACC entitlement is $16,000 per year. 
  • If you suffer from an illness, sickness or degenerative disability your entitlement is $0.00

Example 2:

You are on the default ACC Cover Plus and your taxable income is $200,000 per year 

  • If you suffer an injury and are unable to work your ACC entitlement is only $94,533 per year (1). 
  • If you suffer from an illness, sickness or degenerative disability your entitlement is $0.00

Example 3: (As an alternative)

Your business turns over $175,000 per year and your taxable income (drawings) is  $100,000. You have used ACC Cover Plus Extra to significantly reduce your ACC Levies and have used the savings on ACC Levies to pay for a Key Person or an Income Protection insurance policy (2). 

  • If you suffer an injury, illness, sickness or degenerative disability your entitlement is $75.000 (3)

An Adelphi Insurance adviser can sit down with you and your business partners, in the comfort of your office or home, and develop your business's personalised Business Insurance Plan to determine the ideal mix of ACC and Disability cover you need for your business’s unique circumstances and needs.

  1. The maximum statutory level of compensation (before tax) is $94,553 (2014/2015 levy year) regardless of how much you earn.
  2. The minimum statutory level of compensation you can nominate (before tax) is $22,880 (2014/2015 levy year).
  3. Based on an underwritten Key Person or indemnity Value Income Protection policy with a monthly benefit of $6,250.

 

 

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