PKF Carr & Stanton, Hastings, New Zealand
02 Aug 2016
by Eddie Aickin, Partner - PKF Francis Aickin
ACC challenges have been more evident in the last few months, than is normal. These have fallen into two categories:
The problem of the self-employed and business people securing adequate loss of income cover in the event of an accident, crops up all the time. The normal ACC Cover Plus (“CP”) base compensation is primarily on earnings last year and does not recognise the variations in income which self-employed people can experience. There is a better ACC scheme than CP, and we encourage businesses to use it. It is Cover Plus Extra (“CPX”), which offers self-employed people the ability to choose their level of cover. For example, a person in a low income start-up phase may decide that their earnings might be only, say $25,000. In the event of an accident, they would need more ACC cover than the $385 per week that CP would offer them. On CPX they can buy the extra guaranteed cover that they need. Other advantages that Cover Plus Extra offers include: No arguments: Some readers will know from bitter experience that proof of “loss of earnings” under CP cover can be a difficult and protracted experience. And worst of all, it comes at a time when you least need your difficulties compounded. With CPX the cover is pre-agreed and that’s what you get. 100% cover: Most business people know that injured or not, they cannot afford to be off work, and most will limp back for as many hours as they can as soon as they can. Under CP they may well be penalised for that diligence. But under CPX, cover continues until full time work resumes. Limitation of cover: For business people who are able to obtain better or cheaper accident cover privately, CPX offers the ability to limit ACC cover to a minimum of about $500 per week. That reduces the ACC cost and subsidises the chosen private cover cost. ACC Cover Plus Extra is really a no brainer for most self-employed people! MULTIPLE ACTIVITIES For businesses with multiple activities, ACC rules require that all employees be levied at the highest rate applicable to the business. One classic example is of a business that does both Management Consulting and Silviculture. It’s a strange business combination, but if it’s not managed well, then the business will pay the same levy for the office workers as they do for the tree pruners. That could be a difference of as much as 3.5%. Business profits are frequently below 10% of gross income, so an extra 3.5% loading on the costs of a labour intensive business is a big number. There are three ways to manage this:
If you do have multiple activities in your business paying one ACC levy rate, don’t ignore the problem. Get good advice.
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