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New Zealand's ACC Levies Increase

by Mary Swire, Tax-News.com, Hong Kong

11 December 2009


In an effort to balance cost increases for families and businesses, while ensuring the financial viability of the scheme, New Zealand's Accident Compensation Scheme (ACC) levies for workers, employers and motorists will increase next year but by less than previously recommended.

Levies, which are reviewed and set each year, are paid by businesses, motor vehicle owners and employees for injury cover that is funded by the ACC. The ACC is divided into six parts, each covering a specific group of injuries. Funding comes from levies based on people’s earnings, levies from motor vehicle ownership and usage, and the government budget.

A range of injury cover is provided for New Zealanders, and visitors to New Zealand, including motor vehicle, non-work and work-related injuries. Employers can seek discounted levies in return for taking responsibility for workplace health and safety.

New levy rates are required to be set by March 31, 2010, otherwise the 2009/10 levy rates would remain in place, and the ACC would be significantly underfunded. The Inland Revenue Department requires notification of the new earners’ levy rates by December 17, 2009, effective for the period April 1, 2010 to March 31, 2011.

"Setting these levy rates has been a difficult balance of minimizing the cost increases on families and businesses, keeping the pressure on ACC to better manage its costs, and ensuring ACC's long-term financial viability," ACC Minister, Nick Smith, said.

However, he added: "These levy increases are necessary because ACC's claim costs have increased by 57% in the past four years. The government is pushing out the full funding date for ACC from 2014 to 2019, pulling back on extensions to the scheme by the previous government, and putting in place a wide range of cost-saving measures.”

"These levy increases are significant in that they will cost a person on the average wage an additional NZD148.50 (USD108) per year (NZD2.86 per week) as well as NZD30 per car. The government has rejected larger increases recommended by ACC and the Department of Labour because we are concerned about the broader economic impact on families and businesses at a time when the economy is beginning to recover from recession.”

He emphasized that the rises "are sufficient to stop any further deterioration in ACC's overall finances but will be insufficient for ACC to close the gap between its assets and liabilities by 2019. We will be doing additional work in 2010 to address the long term issues facing ACC.”


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