ACC – Understanding the basics of the Accident Compensation Corporation

Dealing with the Accident Compensation Corporation (ACC) is a major business cost, especially for those in trades or lines of business where accident rates are high, yet many business owners just pay ACC bills willy-nilly without checking their correctness or looking for the many ways to reduce ACC.

Here are some pointers to get you thinking:

• Even the new simplified ACC bills are difficult to understand so get your accountant to check the bills before you pay them. Many ACC bills contain errors that go undetected, such as incorrect trade classification. For example, recently a client’s wife was billed $870 for one year’s ACC for her $1,050 pin-money very part-time self-employment income!

• If you have good Income Protection Insurance it’s pointless paying full ACC as well so reduce the ACC premiums to the minimum by switching onto ACC Cover Plus Extra — it can save you thousands. Some insurance brokers are great and reduce your ACC as part of the package, but many don’t care or are inexperienced. Choose a good broker or get your accountant to sort it out.

• Make sure ACC know whether you’re part or full-time. If you work less than 30 hours per week, your ACC will be based upon your actual profits — not the minimum income as set by ACC — and thus much reduced.

• Another tricky area is passive income. If you’re a property investor, whether you pay ACC depends on how much of a rental business you’re operating (for instance if you use a rental agent or not, or if you own a farm but use a sharemilker).

• If you’re well off and don’t need ACC cover, some accountants recommend a trading trust whereby the profits are allocated as trust beneficiary income rather the business owners taking salaries. This way, no ACC is payable at all and ACC tell me they lack the resources to track down this type of dodge. However, there a number of disadvantages with trading trusts so seek good advice first!

• The ACC category is based upon the line of business as a whole, not the tasks carried out, so if you have a spouse or partner doing the admin or sales, get them on ACC Cover Plus Extra, where the ACC is based upon their activity rather than that of the business. Similarly, if you have a few admin, sales or support staff consider setting up a different entity to employ them.

• If you have more than one activity in your business, the ACC is based on the highest risk activity, so set up another entity or entities and operate an activity in each. Otherwise, consider the opportunity for ACC Cover Plus Extra for the less risky activities.

• Investigate whether the health and safety discount is worth having. You get a 10 percent reduction, and for some businesses this could outweigh the cost, especially where health and safety policies are inevitable.

Don’t take excessive ACC bills for granted or be put off by the complexity of ACC; seek advice and treat yourself with the savings made.