Why would you choose your level of ACC cover?

ACC is one of the most confused topics we discuss in our client meetings.  So lets see if you can help clarify what its all about.

When you are receiving wages and having PAYE deducted, there is a portion of this that relates to ACC Earner Levy cover – that is the cover for all non work related injuries, and everyone getting a wage pays this portion within their IR deductions (IR pay it on to ACC).   For those that receive an income without PAYE deducted, ACC will send you a bill based on your income filed in your tax return.

There are three different accounts that you will pay into:

  • Work Account Levy
  • Earners Levy (this one is not tax deductible against your business income).
  • Working Safer Levy

When your accountant files your first income tax return, this activates your account with ACC and they will send you a  bill based on those earnings to cover you for the above three accounts.  At the same time, they will include a provisional estimate for the following year (so this could end up a fair sized bill to pay).    Its a bit like provisional tax, where once your first tax return is filed, this generates a bill for the last financial years income, and potentially the current year also.  So you could end with both at the same time, given they are activated at the time the returns are filed…. ouch…

With regards to ACC, you can choose to have a level of cover you have, as opposed to be covered based on your previous years income (which you may not know at the time it is needed, and can seriously hold up the process of getting assistance for weekly compensation.  Not when you need when dealing with any type of injury as a business owner).   This is called ACC CoverPlus Extra (CPX).

What is CoverPlus Extra ?

CPX is an optional cover product that allows you to choose how much of your income you want to be covered if you have an accident and can’t work. It is especially suited to those who:

  • have fluctuating income, either yearly or seasonal as you’ll know exactly how much you will receive
  • want to choose how much you’re covered for
  • are newly self-employed with no earnings history and want assurances around your cover and getting it without delays.

Benefits include

  • No surprises at invoice time.  Your levy invoices are predictable as they are calculated by using the cover amount agreed with ACC.
  • CPX covers injuries that happen anywhere, eg at home, on the road, during sports. Like the standard cover, the injury that leads to time off work doesn’t have to be work-related.
  • Knowing exactly how much you’ll receive in weekly compensation if you get injured.

CoverPlus Extra (CPX) options

Full compensation

With this option ACC will pay 100% of the agreed cover minus tax, divided into weekly payments until you can get back to full-time work. This provides greater flexibility and certainty. For example, if your cover is for $52,000 per year, you will get 100% of that amount each week, which is $1,000 before tax.

Lower levels of weekly compensation

In return for a slightly lower levy, this option provides weekly compensation payments which reduce when returning to part-time work. For example, if your cover is $52,000 per year, they will pay 100% of this (before tax) until you start working part-time. If you return to work for 50% of your normal working hours, your compensation will reduce by 50%. The compensation stops when working at least 30 hours per week.

To find out if CPX is the best option for you by calculating your levies here.

Or, have a chat with us.

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