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How ACC Levies are Calculated

Updated: Mar 11

ACC levy invoices have come out in the last couple of months, and with the various types of cover and invoices issued from ACC it can be a bit confusing, so this gives a quick rundown of how levies are calculated.


ACC levies are broken down into 3 levy types. The work account levy is based on your industry classification and the risk associated with that industry. For dairy farming, the levy is $2.27 per $100 of wages/earnings, whereas for building it is $1.68, and for administration it is $0.19.


The working safer levy is a flat rate of $0.08 per $100 of wages/earnings and does not vary between industries.


The earner levy is a flat rate of $1.21 per $100 of earnings and does not vary between industries.


Workplace Cover


ACC WorkPlace Cover (WPC) is for employees only (not shareholder employees). It is based on your total PAYE wage information provided to the IRD each year (1 April – 31 March). Once the IRD has all the PAYE information for a financial year, it passes this information along to ACC who issue an invoice, usually around July-August each year.


The invoice is broken down into a final levy for the financial year just ended, and a provisional levy for the coming year. The provisional levy is based on the previous year plus an adjustment for inflation.


As an employer you only pay the work account and working safer levies, and the earner levy is deducted from the employees pay in the PAYE.


CoverPlus


Sole traders and those in a partnership are invoiced from ACC as Self Employed CoverPlus (CP). It is based on their business income for the financial year and is issued once the tax return is processed by the IRD. Depending on when the tax return is filed, this can be 12-18 months after the financial year has ended. It is levied based on your industry classification and does not include a provisional levy for the coming financial year.


Shareholders of a company that aren’t on CoverPlus Extra are invoiced from ACC as WorkPlace Cover for Shareholder Employees (WPC SHE). It is based on the shareholder salary paid to the shareholder for the financial year and is issued once the tax return is processed by the IRD. Depending on when the tax return is filed, this can be 12-18 months after the financial year has ended. The invoice is broken down into a final and provisional levy and is levied based on your industry classification.


As a shareholder on CoverPlus, you cannot nominate your industry classification like you can with CoverPlus Extra (ie. partners who only do bookkeeping for the business cannot be on the administration classification, they must be on the business classification).


Shareholders CoverPlus Extra


Self employed persons can apply for CoverPlus Extra and nominate a level of cover rather than it be based on their business earnings or shareholder salary. This applies for sole traders, partners in a partnership and company shareholders. Please see this link ACC CoverPlus vs CoverPlus Extra for the Self-Employed (smsaccountants.co.nz) for the blog post that explains the key differences between CoverPlus and CoverPlus Extra for shareholder employees.


Be aware that CoverPlus Extra invoices are due for payment in advance of the financial year, usually issued around April, whereas CoverPlus invoices are due for payment once the tax returns have been filed and the information passed along to ACC, which can be 12-18 months later.


Also be aware that if you don’t pay your CoverPlus Extra invoice on time, ACC will cancel the policy and default you back to CoverPlus, and you will need to reapply for CoverPlus Extra. You cannot backdate CoverPlus Extra.


Company shareholders vs sole traders/partnerships


The key difference between sole traders and those in a partnership compared to shareholders of a company is that sole traders/partnerships pay ACC levies on the entire business income, whereas companies only pay ACC levies on the shareholder salary.


For example, a sole trader makes a profit of $100,000 from their business and all of this is subject to ACC levies.


For example, a company makes a profit of $100,000 from the business, however only $50,000 of this is paid out to the shareholder as shareholder salary, therefore ACC levies are only paid on the $50,000 shareholder salary. The $50,000 profit that is retained in the company is not subject to ACC levies.


This is one of the benefits of operating a business under a company. The $50,000 of retained earnings could be paid out to the shareholder the next financial year as dividends and would still not attract ACC levies as it is passive income.


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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