25 July 2011

It is possible that some self employed clients not in the PAYE system may be able to save on their Accident Compensation levies. Please refer to the article below on ACC Matters.

If you think that this situation may apply to you, please contact your JDW director or accountant to investigate this further.

Please contact Murray, Brian or Vijay on 579 7096

ACC Matters

As you know, in completing your accounts we ensure that all legitimate business expenses are accounted for. By doing this your taxable earnings are reduced so that you pay the minimum amount of tax possible.
In addition, your ACC levy, which is based on taxable earnings, is also minimised.

The downside of this is that, if you are unable to work because of an accident, your weekly ACC benefits will be less than 80% of the income you actually generate for the business.
We recognise that this is not necessarily the best situation for you.

Also there are alternatives to the default ACC cover that can allow the self-employed and shareholder-employees to ‘tailor’ their ACC cover and result in significant reduction to their levies.

Because this is not our core business, we are using the services of an adviser who specialises in this field to assist our clients review their ACC cover and business risk to arrive at the best option.

 ACC for Self-Employed and Shareholder-Employees

• Do you receive a PAYE salary?
• Do you know how much ACC levies you pay?
• Do you know the actual dollar amount that will be paid if you are off work because of an accident?
• Do you know what benefits are paid out if you die as a result of an accident?
• Is your ACC plan CoverPlus Extra?
• Did you know that, with ACC CoverPlus, each shareholder employee can be rated based on what they actually do?·  

If the answer is “No” or “Maybe” to any of these it’s time for a review of your ACC.

How can changing classification help you?

Here’s an example.
Scott & Liz own a furniture removal company where Scott does the removals and Liz the bookwork. They are both covered by the default scheme, ACC Workplace Cover under the company classification of Road Freight Transport (Furniture Removal Service) – 61100
Last year they drew salaries of $90,000 and $60,000 respectively.
As they are both rated under the company classification, Liz’s Workplace Cover levy was $3,649.
By switching to CoverPlus Extra, we were able to reclassify Liz as Office Admin, class 78540, resulting in a drop in her levy to $1,638 – a saving of $2,011!

Some other benefits of CoverPlus Extra:
• The weekly compensation for CoverPlus Extra is an agreed amount. You know exactly how much you will get, no matter what your last year’s income was.
• You are able to ‘dial up’ the level of cover to more accurately reflect who generates the income. Possibly Scott in the example?
• You can ‘dial down’ the level of cover. Useful if you have good income protection cover or if one of the people off work doesn’t generate significant income for the business (Liz?).