Government to reduce ACC work levies for businesses and self-employed

The Government has announced lower work levies for businesses and the self-employed. Photo / File

The Government will reduce the ACC work levy paid by business and the self-employed, saving businesses $100 million over the next two years, Prime Minister Jacinda Ardern and ACC Minister Iain Lees-Galloway have announced.

It will hold all other ACC levies at their current rates.

The average work levies paid by employers and self-employed people will decrease from 72 cents to 67 cents per $100 of liable earnings (a 6.9 per cent decrease). That is in line with a recommendation from ACC in September.

"When the rises in ACC levies was first discussed the Government took a clear position that a compelling case would need to be presented in order for us to agree to levy increases, and that Cabinet would consider the wider public interest," Ardern said at her post-Cabinet press conference today.

"We have done just that and concluded that the levies would not increase, and actually decrease for work levies paid by employers and self-employed people. This will save New Zealand businesses and their customers around $100 million over the next two years compared to current rates.

Other key aspects of the ACC levies for 2019/20 and 2020/12 include:

• The earners levies paid through PAYE (or invoiced directly through ACC for self-employed people) will remain at its current level of $1.21 per $100 of liable earnings

• The average motor vehicle levies, which include the annual license levy and petrol levy, will remain at $113.94.

Lees-Galloway said alongside the reduction in work levies, the motorists and earners levies would remain the same for the next two years.

He also announced that the ACC Vehicle Risk Rating (VRR) programme would end.

"The VRR programme, which applies different levy rates to different makes and models of cars based on their safety ratings, is challenging for ACC to administer and lacks evidence that it is contributing to a safer vehicle fleet in New Zealand," he said.

"There is no evidence that variable levies based on VRR contribute to injury prevention or encourage the purchase of cars with higher safety ratings. It also loads more of the burden onto low-income people and families, as they are generally less able to buy cars with the best safety ratings."

The new work and earners levies will come into effect on April 1, 2019. The vehicle risk rating will no longer apply from July 1, 2019, with the motor vehicle rates coming into effect on the same date.

ACC caused public backlash when it announced a recommendation that levies on petrol be increased in September. It later backed down from that idea.

It had originally proposed increasing the petrol levy by 1.9 cents. That would have been on top of the nationwide petrol excise duty of 3.5 cents a litre.

ACC chairwoman Dame Paula Rebstock said in October that after receiving 6000 submissions – six times more than the last time it sought public consultation of levy changes two years ago – the board decided against increasing the petrol levy.

All employers and self-employed people working in New Zealand pay an ACC levy. At present, the average amount paid is set at $0.72 per $100 of liable income. With fairness as a guiding principle, those organisations involved in riskier work where accidents and injuries are more likely could pay more. For example, higher risk industries could pay up to $5.58 per $100, while lower risk industries pay as little as $0.07 per $100.

The funds collected pay for injuries caused by accidents that happen at work or are work-related. More than half of ACC payouts – 62 per cent - are allocated to compensation, with those unable to return to work receiving up to 80 per cent of their income, though there is a maximum threshold in place.

The balance goes towards services such as elective surgery, radiology, physiotherapy, and rehabilitation, and preventing injuries from happening in the first place.

"With more people returning to work earlier than we had previously forecasted, the biggest portion of our cost base is coming down, with less compensation being paid out than anticipated," ACC chief customer officer Emma Powell said in October.

"This is behind the proposed reduction in business ACC levies which will bring it to $0.67 per $100 on average, reflecting a 6.9 per cent saving across the board."

At present, ACC is also in the process of refunding more than 300,000 business customers $100 million plus accrued interest after overcharging them for 15 years.

Between 2002 and March 2017, when the error was discovered, ACC overcharged about 106,000 people in the first year of being self-employed by a total of $34 million.

Over the same period, some 200,000 businesses were overcharged $64m on provisional invoices.