HOW TO SAVE $$$ ON YOUR ACC LEVIE
In NZ ACC cover is compulsory!!!
Self employed people in NZ must pay an ACC Levy.
ACC have 2 covers – ACC Cover Plus and ACC Cover Plus Extra
ACC Cover Plus is the default scheme and it covers you for medical treatment, rehabilitation and compensates you for 80% in lost earnings in the event you are unable to work due to an Accident (whether work related or not). It is important to note here that if you have an illness you are not covered by ACC
ACC base the levy on the type of work you do and your earnings, for example:
- A Builder earning $100,000 per annum can expect an invoice from ACC for $3,600 every year!!!
- An Insurance Adviser earning $100,000 can expect to pay around $1,600 every year!!!
The riskier the Occupation, the more in ACC levies you are charged.
What many Kiwis aren’t aware of is there is another superior option for the Self-employed…… ACC Cover Plus Extra provides the same coverage as ACC Cover Plus, but it compensates you for lost earnings based on a pre-agreed amount between You and ACC. You choose the compensation amount you want to receive if you are off work due to suffering an Accident. Each year ACC set minimum and maximum compensation limits. For the 2020/2021 Financial year the minimum is $29,453pa and maximum is $104,729pa.
ACC Cover Plus Extra allows you to minimise your ACC benefit entitlement to $29,453. For the above examples this would mean:
- A Builder earning $100,000pa can reduce their levy from $3,600 to $1,450, that’s a saving of $2,150pa!!!
An Insurance Adviser earning $100,000pa can reduce their levy from $1,600 to $650, that’s a saving of $1,000pa!!! As you can see there are considerable savings that can be obtained. These savings can be used to provide much more comprehensive coverage than what ACC offers via Private Insurance to include cover for Illnesses (something ACC does not cover).
ACC is very limited in what they cover. For example, they only provide cover if you are off work due to an Accident. ACC is tightening their claims criteria that applies to new injuries and old injuries that reoccur from general wear and tear. As mentioned before and most importantly, ACC does not provide any coverage if you are unable to work due to an illness!!!
ACC is also very limited in how much it will compensate you in lost earnings as a result of an injury/accident. The compensation amount is based on the income reported on your tax return.
Like many NZ small business owners do, if you split your income with your Spouse then you will only receive 80% of the income split that’s been declared to IRD under your name resulting in a heavily reduced compensation payment. This compensation payment will then be taxed resulting in further reductions and if you return to work on a part time basis your compensation will be adjusted accordingly.
So, what do you do if ACC Cover is not enough? This is where private insurance comes into play. There are many policies available that fill the gaps that ACC does not cover. i.e. covering you for accidents AND illnesses. This means you have certainty that no matter what puts you out of work, you and your family are protected.
It is certainly more beneficial for all Self-employed Kiwi’s to reduce their ACC coverage benefits and apply the savings to much more comprehensive private insurance.
At Rix Lifestyle Protector we offer a FREE ACC Optimisation Plan to all self-employed Kiwis showing you how your ACC levy can be reduced, and the savings put too much better use.