ACC proposes $500m levy cut

ACC has proposed levy reductions of more than half a billion dollars for workers and businesses from April next year.

The proposed levy reductions of 17% for employees and 22% employers would save households $340 million a year and businesses $247 million a year.

“These significant levy reductions are good news for families and businesses and are affordable because of the prudent management of ACC’s finances,” ACC Minister Nick Smith said.

“These levy reductions are affordable because we have reversed ACC’s large deficits of $2.4 billion in 2007/08 and $4.8 billion in 2008/09 with surpluses of $2.5 billion in each year since.

“The big turnaround is because ACC’s annual claim costs, which grew by 50% between 2005 and 2008, have since been reduced by 15%. Improved rehabilitation has seen a 20% reduction in the number of people on long-term compensation, which is ACC’s biggest cost.”

He said ACC was on track to achieve 100% solvency in the Earners’ and Work Accounts in the next year, enabling levy reductions for employees and employers.

However, he said reductions in motor vehicle levies were not affordable yet because solvency in that account was only at 66%.

The Earners' Account Levy (paid by wage and salary earners) is proposed to decrease from $2.04 to $1.70 (including GST) from April 1 next year.

The average Work Account Levy (paid by employers and the self employed) is proposed to decrease from $1.47 to $1.15 (excluding GST) per $100 of liable earnings.

Work levies for individual companies depend on their industry classification and experience rating.

BusinessNZ chief executive Phil O’Reilly said the reductions would be welcomed by both businesses and employees.

But Mr O’Reilly expressed concern that pre-1999 costs, which include pre-1992 non-work accident costs, would continue to be funded by employers.

“Employers are being required to pay millions of dollars for claims that have no relation to the workplace at all. In the interest of fairness, these residual claims should be met by general taxation.”

BusinessNZ said it would be making a submission on the ACC levy consultation 2012/13, which closes on August 15.