ACC Structure for Business Owners
Scott Crocker - Financial Advisor explains…
If you are a self-employed business owner who has ditched the PAYE salary and you are running your own business, no doubt you have a constantly growing ‘to do’ list. Something that is often neglected is the improved structuring of your ACC levies.
With the right advice it is easy to improve and streamline your ACC experience and ensure you have the correct set up for you and your business. To do this there are two ACC structures that self-employed Kiwis need to consider:
1. ACC CoverPlus Standard (ACC Standard)
2. ACC CoverPlus Extra (ACC Extra)
When self-employed income is declared in NZ you are automatically placed on ACC Standard Cover.
With ACC Standard cover:
A successful ACC accident claim will pay you 80% of your taxable income
You must prove an actual loss of income, based on your last 12 months of financial accounts
Your levies can often be unexpectedly high as they are calculated and paid as a lump sum at the end of the financial year
To claim you will need 12 months proof of your personal income via financial accounts, ACC will then cover 80% of your personal taxable earnings. This can be a challenge for business owners, especially those new to business. Business income can fluctuate from month to month, and you may not have your accounts finalised. Whatever the reason, just by the nature of business it can be challenging to 'prove' the loss of income that is accurate to your situation and in turn reduce the chance of a smooth and sufficient claim payment from ACC.
Calculating ACC Standard Levies:
For shareholders – previous year’s liable earnings for provisional invoice, and actual earnings for final invoice, as provided on the IR4 tax return
For self-employed – actual year’s liable earnings, as provided on the IR3 tax return
Levy rates specific to your business activity
CoverPlus Extra gives you the ability to choose an agreed level of cover with ACC giving business owners certainty in the amount of cover they have and levies they will pay. In most cases it is a much better way to structure ACC levies.
It is especially suited to business owners who:
Have fluctuating income, either yearly or seasonal
Want to apply for more or less cover than actual declared income
Want certainty of levies payable
Are newly self-employed with no earnings history and want certainty around cover
Want flexibility in payment scheduling (Fortnightly, Monthly, quarterly etc.)
At claim time there is no need to prove a loss of income or provide financial statements, the cover sum insured is agreed at the beginning of each financial year. In the event of a successful claim 100% of the amount noted on the ACC Extra contract will be payable.
Levies are calculated by:
The Agreed cover amount
The levy rates specific to your business activity
As Kiwi’s we are fortunate to have the no-fault accident insurance scheme we know as ACC. To ensure your ACC levies are working for you and are structured correctly it’s important to always get advice.
ACC does not provide cover for:
Non-work gradual process injuries
Ageing process
Illness
Stress / Mental Health
Injury to teeth arising from their natural use
Hernia caused by coughing or sneezing
Contact scott@abacusgroup.co.nz to learn more.