COUNT ON IT: Understanding your ACC payments

INVOICES from ACC will soon starting hitting your business mail box. Here's a simple guide to help you understand the invoicing system.
If your business employs staff, you will pay ACC workplace cover levies to cover the cost of work-related injuries occurring during the year April 1 to March 31.
You will also be paying residual levies which cover the continuing costs of injuries that happened in your industry before July 1, 1999.
The third charge you face is the health and safety in employment levy which funds the Department of Labour's occupational safety and health service. ACC collects these monies for the Department of Labour.
The envelope you receive from ACC normally contains three sheets of paper:
A summary of account showing the total amount you need to pay.
A final "wash up" invoice for the previous year, which includes your residual levies and the health and safety in employment levy.
A provisional invoice for the current year, based on your liable earnings from the previous year adjusted by the labour cost index.
The residual levy, and the health and safety levy are not included on this provisional invoice as they are billed at year's end, not on a provisional basis.
The levies you pay are based on "liable earnings", a term ACC uses to describe the part of your payroll that they use to calculate levies. This comes from information submitted on your monthly PAYE schedules.
They will have been adjusted by the IRD for any earnings not liable for ACC levies (such as redundancy payments) and any amounts paid to employees which exceed the maximum income liable for levies ($102,921 per employee for 2009/10 year). The amount of your levy is determined by your classification unit, which is based on your business activity and relates to the goods you produce or the services you provide.
It comes from the Business Industry Description code you selected when you registered for GST. Classification unit rates change regularly and are set to reflect the actual cost of work-related injuries (that is, a high risk occupation with lots of accidents will have a higher rate than a lower risk, sedentary occupation.)
If you are self employed, you will receive your ACC invoice some time after July each year, once your IR3 tax return is filed with the IRD.
Your invoice will be made up of the following levies; work levies to pay for work-related injuries, earner levies to pay for non-work injuries, residual levies to pay for the ongoing cost of pre-July 1, 1999, injuries, and the health and safety in employment levy.
Your ACC policy is called CoverPlus instead of Workplace Cover.
When your envelope is delivered it will contain:
A summary of account which tells you the total amount owing for the new levy year and any payments outstanding on past invoices.
A tax invoice for the amounts being invoiced for the levy year. Your tax invoice will also show whether you have been treated as full or part-time self employed.
A calculation sheet to show you how your liable earnings have been calculated, and how they have been used to calculate the levies you must pay.
Liable earnings for the self employed differs from employers. It will include any or all of the following, less expenses: Total gross payments (for example, withholding income); partnership earnings (if you physically work in the partnership); and self employed earnings.
ACC obtains the liable earnings information from the IRD based on the tax return you file. When you receive your tax invoice, it is important to check whether the fulltime/part-time status is correct as this will affect the amount of levies being charged by ACC.
Part-time for ACC purposes is defined as a person who works on average fewer than 30 hours a week over a financial year.
If you are a PAYE shareholder, the company will receive an invoice based on the Shareholder Salaries filed in the company tax return with the IRD. The invoice is made up of the same levies as a self employed person.
Disclaimer: No liability is assumed by Staples Rodway Tauranga Ltd for any losses suffered by any person relying directly or indirectly upon the article above. It is recommended that you consult your adviser before acting upon this information.
Karen Brock is from Chartered Accountants, Staples Rodway Tauranga.