Reducing your ACC
If you are self employed as a sole trader or trade through a company, then ACC will send you an invoice each year based on your most recently filed tax return and may also invoice you for the year ahead.
Your ACC invoice is made up of two rates, the employee levy and the employer levy. The employee levy was 2.04% for the year ended 31 March 2012 (to max earnings of $113,669). The employer levy depends on your industry. For example, the employer levy for accountants is only about 0.5% whereas builders are about 3.9% of earnings (ie profit).
So, if you are a builder and earn $60,000, then your annual ACC cost would be about $4,070 ($60k x (2.04% + 3.9%) plus 15% gst).
ACC Coverplus Extra is optional cover that lets you agree on a level of lost earnings compensation (as opposed to the standard 80% of actual earnings). However, it is not available for those paying themselves a PAYE salary. The benefits of ACC Coverplus Extra are:
- You agree on a lower level of cover for lost earnings thereby significantly reducing your ACC. You then take out private insurance to make up the difference in insurance cover. Overall, the cost should come down.
- If you made a claim, there is no need to prove your earnings to ACC as the compensation is already agreed.
There is a great calculator on the ACC website that can show you a comparison between the options. Just click on the ACC Coverplus Extra link at www.acc.co.nz/calculator
Here are some examples. Take the self employed accountant earning $100,000. They can reduce their ACC levies from $2,413 to $918 by reducing their earnings compensation down to the minimum amount ($21,216 for the year ended 31 March 2013). Some of the amount saved of $1,495 can then be used to take out private insurance.
The builder earning $60,000 can reduce their ACC levies from $4,070 down to $2,209. A builder earning $100,000 can reduce their ACC levies from $6,783 down to $2,615. The more you earn and the riskier your industry, the more you can save.
If you are interested in finding out more about ACC Coverplus Extra, then you should talk to me or your insurance advisor.
Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.