ACC levies and the self-employed

Every working New Zealander is covered by ACC and the scheme is funded by levies. Employees have levies deducted or paid on their behalf; the self-employed are invoiced directly, usually after their tax return is filed and their liable earnings are known.

The calculation has two main inputs. The first is your liable earnings — broadly, the income from your self-employment that ACC assesses levies on. The second is your classification unit, which is ACC’s categorisation of what your business actually does. Classification units carry different levy rates because different work carries different injury risk, and the spread between a low-risk office classification and a high-risk trade classification is substantial.

Because the invoice usually arrives well after the earnings period it relates to, and because it is calculated from information supplied to Inland Revenue rather than something you fill in, many self-employed people never look at how the number was built. That is a mistake, because the classification unit in particular is worth checking.

• Liable earnings from self-employment, as assessed for the relevant period.
• The classification unit that describes your business activity, which determines the rate applied.
• Levy components covering work injury and non-work injury, each calculated on its own basis.
• Any minimum and maximum liable earnings levels set by regulation.
• Whether you hold standard ACC CoverPlus or a CoverPlus Extra agreement, which changes how cover and levies are set.
• Any experience-based or safety-related adjustments that apply to your circumstances.

Checking your classification unit

The classification unit is assigned based on what ACC understands your business to do. If it is wrong — because the business has changed, because it was assigned from a broad description years ago, or because an activity that is a small part of your work has been treated as the main one — you may be paying a rate set for work you do not actually do.

1. 1Find your classification unit on your ACC invoice.
2. 2Read the description and ask honestly whether it describes what the business mainly does now.
3. 3If it does not, contact ACC and ask about a review. Be accurate — the aim is the correct unit, not the cheapest one.
4. 4Check it again whenever the business changes what it does.
5. 5Ask your accountant to look at it as part of the annual cycle, since they see the invoice anyway.

Current levy rates, thresholds, minimum and maximum liable earnings, and the classification unit list are all published by ACC and are set by regulation. They change. Check acc.co.nz for the figures that apply to your levy year rather than relying on any number quoted elsewhere, including here.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether your classification unit matches what the business actually does today.
• Whether your liable earnings have been assessed on the right basis, particularly where you take both salary and drawings.
• Whether a CoverPlus Extra agreement would suit you better than standard cover.
• Whether the invoice period matches the earnings period you expected.
• That levy rates and thresholds change and are published by ACC.
• That paying levies does not extend the scheme to illness, however much you pay.

Every New Zealand insurer writes income protection cover to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• An adviser will put ACC and private cover on the same page, which is the only way to see the whole picture.
• They can quantify what your ACC entitlement would realistically be, so the private cover is sized to the gap rather than guessed.
• For newly self-employed clients they will raise CoverPlus Extra before an accident makes the question urgent.
• They work alongside your accountant, who is the right person to look at the levy calculation itself.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.