Accident Compensation Corporation (ACC)

Employees, employers, and the self-employed all pay ACC levies in New Zealand. Employees pay ACC levies through the PAYE system whereas business owners, pay ACC once a year normally based on the level of the previous years net profit.

Unfortunately ACC invoices are not always accurate but we believe a lot of self-employed people pay them anyway thinking they are correct.

Accounting Tasman encourages clients to let us see your ACC invoices so we can check that the correct classification rate is being used, that the status of full-time/part-time is correct, and the income figure agrees with the previous years figure. We will contact ACC to get the invoice amended for you if we think there is an error.

Clients who work less than 30 hours a week and are therefore classified as part-time for ACC purposes often receive ACC invoices which have defaulted you to full-time. In the majority of cases, if you are part-time and your business has made a loss, there is no ACC payable. We can get this corrected for you.

Also if you are trading as a partnership, and one of the partners is not active in the business they are not liable to pay ACC levies on their share of the net profit. They are regarded as a ‘sleeping partner’ and their role in the partnership is a passive one. This can apply to husband and wife partnerships. However you cannot have it both ways. If the passive partner is injured and hasn’t been paying ACC levies they will not be entitled to any Accident Compensation.

There are two types of ACC, Cover Plus and Cover Plus Extra. When you first set up in business you are defaulted to Cover Plus. This means if you are injured you will receive 80% of your previous year’s income as compensation provided the business does not continue to derive income while you are not working. Farmers for example may still continue to earn income as they have employees, or a manager working the farm, or the neighbours may pitch in and help. It is possible in this situation ACC will deny your claim.

To overcome this it is advisable to switch to ACC Cover Plus Extra. You nominate an income figure that you would like to be covered for, and that is the amount that will be paid out if you are injured. The premium for Cover Plus Extra is higher than that for Cover Plus, but you have a lot more certainty on how much ACC compensation you will receive if you have an accident and cannot work for a period of time.

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CHARTERED ACCOUNTANTS
Richmond, Nelson.