How are ACC Levies Calculated?

Levies are calculated on income in three ways: earners’ levy, work levy and working safer levy.

The Earner’ levy is a flat rate assessed each year currently $1.45 for every $100. If you receive PAYE income, the ACC Earners’ Levy is part of the PAYE deductions. If you are self-employed or receive a non-PAYE shareholder salary, then you are invoiced after you file your income tax return.

The Work levy is based on the risks involved in your industry and your claims history as well as the size of your payroll.

The Working Safer Levy is a flat rate collected to fund WorkSafe New Zealand.

There is an optional Cover Plus Extra (CPX) scheme for self employed people to get an agreed level of cover. This is described further below.

ACC also charges Motor Vehicle levies, as part of the cost of petrol and vehicle licence fees. 

Am I Paying Too Much ACC Levies?

You may be paying too much ACC levy, if you have not chosen the correct business industry classification, your liable earnings are over the maximum threshold or you have ceased activities.

Choosing the Right ACC Business Industry Classification

You are asked to provide your business industry classification (BIC code) when you lodge your income tax return. If you don’t declare a classification, ACC defaults you to Manufacturing, which may be a higher rate than your actual industry rate. Look for your BIC code here, estimate your levies here or download the 150-page guide here.

Be specific about the type and extent of the activity you do to find the closest match. Even within an industry like construction, there are a multitude of choices.

Multiple Business Activities

If you have a business which includes office workers as well as labourers or factory workers, then the highest Worker Levy rate applies to all their earnings. If there’s more than one description at the highest rate, use the BIC code that relates to the largest liable earnings at that rate.

If you’re self-employed, the highest Worker Levy rate came from less than 5% of your self-employed earnings, then you can use the next highest Worker Levy rate.

As subcontractors pay their own ACC levies, you don’t have to include their activities in your choice of business industry or your liable earnings. For instance, if you are a building developer and engage subcontractors to do your labouring, then you don’t need to choose the more expensive levy codes but the lighter “Construction services and property developer – all trades subcontracted”. A word of warning here, don’t handle any tools on the worksite!

In limited circumstances you can apply to ACC to use multiple Classification Units (CUs), when your business operates in different industries. You need distinctly independent activities, each activity has different external customers, one can operate continuously without the other. Producing raw materials in one factory to supply to your manufacturing factory would not be considered separate. For instance, we have a client which earns income from a pilates studio and a flooring consultancy and has applied successfully to use multiple CUs. We were able to show earnings for employees under each activity and produce management accounts for each activity with separate sales and cost of sales data.

Passive Income Partnership

Partnership income is automatically assumed to be from a liable activity. The BIC code should describe the activity of the self-employed person within the partnership rather that the activity of the partnership. But if your partnership is only earning income from passive activities like interest, dividends or residential rental income, then let ACC know this, so they can flag your income as non-liable.

Earnings Over the Maximum Threshold

If an employee or shareholder-employee receives income over the maximum threshold, you will only be levied up to the maximum. The maximum earnings threshold for 31 March 2026 year is $152,790[i].

If an employee has multiple employers, or some combination of PAYE, shareholder earnings and self-employed income then the employee may be levied in full, from all these sources.

You can apply directly to ACC for a review and refund of your overpayment here.

Self-Employed Part Time

There is a minimum levy charged to self-employed people. It’s not published on the usual websites, but we know from recent client invoices for 2024-2025 year, it was based on $44,250 earnings. If you are self-employed and work less than 30 hours a week, your status can be marked Part Time. Your levy is calculated on your actual earnings not the minimum levy amount. You will need to advise ACC of your part time status.

Ceased Trading

Each ACC levy invoice includes a washup for the previous year and a provisional amount for the current year. When you cease trading, you can apply to ACC to assess a final levy and to refund provisional levies overpaid[ii].

Am I Not Paying Enough ACC Levies?

Underpaying ACC becomes an issue at claims time for self-employed people. If you have an accident and can’t work, ACC will compensate you up to 80% of your taxable income after the first week, based on the most recently completed financial year[iii].

Recently Started Trading

“The most recently completed financial year” is problematic if you have an accident in your first year, as you have no earnings history.

Recent Increase in Earnings

Similarly, recent increases in current profits won’t be reflected. Compensation is based on the previous complete year.

Unfiled Tax Return

If your income tax return is not yet filed at Inland Revenue, that can cause delays in calculating your correct compensation claim. You could be spending your injury time searching for records to give to your chartered accountant, instead of resting and recovering.

What is CoverPlus Extra (CPX)?

CoverPlus Extra (CPX) is an ACC insurance product for self-employed and shareholder employees, which lets you choose upfront how much of your income you want covered if you have an accident and can’t work[iv].

It is useful for those who are new to business, with no earnings history, as you don’t have to provide proof of income. It is also useful to those who have fluctuating incomes, as you have some certainty.

Some self-employed and shareholder employees work with their insurance advisors to cap their level of ACC cover through CoverPlus Extra and use those savings for other insurance products: income protection, medical, disability, trauma cover and include cover for non-accident events.

It Pays to Review your ACC Cover Annually

Talk with your insurance adviser to ensure that you have the appropriate cover for your current circumstances. This may include CoverPlus Extra (CPX). If you have just started or stopped a business, then it is even more important that you choose an appropriate level of ACC cover. At the same time, take the opportunity to review your other personal insurances with them, like income protection, medical, trauma and life insurance.

-       Serena Irving

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, business consultants, tax advisors, trust and business valuation specialists.

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An article like this, which is general in nature, is no substitute for specific insurance advice. If you want more information about the issues in this article, please contact your insurance adviser. JDW does not offer insurance advice, but we are happy to recommend a good insurance adviser to you.

  [i] https://www.ird.govt.nz/income-tax/income-tax-for-individuals/acc-clients-and-carers/acc-earners-levy-rates           

[ii] https://www.acc.co.nz/for-business/update-your-business-details/stopped-business

[iii] https://www.acc.co.nz/for-business/understanding-your-cover-options/types-of-cover-for-self-employed

[iv] https://www.acc.co.nz/for-business/understanding-your-cover-options/optional-cover-coverplus-extra-cpx