What would happen to your business if you suffered an unfortunate event and became incapacitated? Would your current ACC or private insurance cover your replacement employment costs, enabling your business to continue to function with your absence? Would the business be able to pay you enough to cover your day-to-day expenses?
To many people, ACC levies are just another compliance cost, an additional tax. If we change our mindset, we can view ACC levies as insurance that can provide us with financial surety in the face of an accidental injury or death. Insurance, in unfortunate situations, that allows us to continue to meet our day-to-day costs, limiting our worries in stressful situations, and providing for our families if we are unable to do so ourselves.
Those who are self-employed have some discretion regarding the specifics of their ACC cover. Cover Plus (CP) is ACC’s default product. Levies are based on the taxable income from the business (i.e. sole trader taxable income, partnership income share, shareholder salaries allocated to you from your company) and will fluctuate with your income. In the event of an accidental injury, you will receive weekly compensation based on 80% of this and would need to prove to ACC that you have suffered a loss in earnings. In the event that you are able to return to work in your business on a part-time basis, your compensation will be reduced to account for this. Annual levies for CP will be charged to you once you have filed your tax return for the year, and are paid in arrears.
Coverplus Extra (CPX) is optional and can be applied for in place of CP, subject to certain criteria. To qualify, you must be self-employed and considered an earner in your business. You cannot be receiving a PAYE wage from your business, and you must eitherbe working a minimum of 30 hours per week in your business, or earning a minimum of $49,365 per annum from your business. If you are eligible for CPX, you can choose the level of cover between $39,492 and $122,232. In the event of an ACC claim, you will be paid compensation at 100% of this agreed level until such time as you are able to return to full-time work. There is no abatement if you are able to perform light duties and there is no need to provide proof of earnings; you will be paid compensation based on the agreed level of cover. CPX levies are paid for in advance on acceptance of your application.
If you have key person or income protection policies, it is prudent to discuss this with your insurer to ensure you are not over or under insured, and that ACC is working in conjunction with other policies.
If you would like to review your ACC coverage, we suggest talking to your tax advisor. The team at MCI are available to help with advisory, taxation or ACC needs. Feel free to contact us for a chat.