Did you have your say on ACC levies?

Even people who are injured while visiting New Zealand are covered by ACC for the cost of their treatment and rehabilitation for as long as they’re in the country (but not for these costs once they return home). This cover is paid for through the Non-Earners’ Account which isn’t covered by levies and is not part of this consultation.   

Funding a lifetime of support

Most claims don’t require our assistance long-term. However, some people with more severe injuries may require our support for many years. Others will need to be supported for the rest of their lives. 

Approximately 18,000 people who received our support last year were injured over 30 years ago. 

Setting aside money for these long-term injuries means ACC can invest some of the levies it collects today until they are needed in the future.  

Our investments

ACC’s investment team has outperformed market benchmarks for 26 of the past 28 years. Every $100 invested in the fund in 1992 is now worth $1,460. 

The additional funds we earn from this investment help meet the costs of claims. This helps us to maintain a low-cost Scheme and minimise how much we need to collect from levy payers. 

Our investment portfolio also provides an opportunity to invest in other ways that support New Zealand. For example, ACC has launched two funds – health & safety and climate change impact – to allow us to invest in innovative initiatives in those areas.

These investments will focus on companies that intend to create social or environmental change with a financial return. 

Future challenges

How we work and play, and our priorities as a nation, will continue to change over time. We look at these patterns when estimating the nature of future injuries and how best to collect funding for them.

For example, the Government declared a climate change emergency in December 2020 and committed to taking urgent action to reduce emissions. This has committed the transport system to net zero emissions  by 2050. The Ministry of Transport released Hīkina te Kohupara – Kia mauri ora ai te iwi: Transport Emissions – Pathways to Net Zero by 2050 that identified opportunities to shift the transport system towards zero emissions.  This work will contribute to the Government’s response to the Climate Change Commission’s advice and will lead to a 10-15 year action plan on how to continue to reduce transport emissions. 

It's likely the coming changes in the transport sector will materially impact the Motor Vehicle Account revenue and costs in the future.  ACC will continue to work closely with Waka Kotahi and the Ministry of Transport to ensure a coordinated move to the future of the transport system.   

We aren’t proposing any fundamental changes to how we collect levies in 2021 but continue to work at a system level to ensure our levy collection system is fit for purpose as the needs of New Zealand change. We will consult further on these opportunities in the 2024 levy round.  

Number of injuries are increasing each year 

Although the COVID-19 lockdowns in 2020 reduced injuries at the time, we’ve seen a return to the usual number of injuries since then.  In the three years since our last consultation on levies, the number of injured people needing support from ACC has grown from 2.026m in 2019 to 2.104m in 2021 (an increase of 1.9% per annum).  

Forecast increase in injuries in the Work, Earners' and Motor Vehicle Accounts                           

To help keep levies as low as possible, we work with businesses and communities to reduce the number of people injured each year.  

Minimising injuries each year has many benefits, not only to the injured person, but also to:  

• the person’s whānau who may have to care for them  
• their employer who suddenly loses the skills of an employee 
• the wider community, such as a sports club or a charity, which can also be impacted when a member or colleague is injured.  

There can only be a meaningful drop in injuries and their costs when all of us are playing our part.  

Investing in injury prevention 

We’re investing in new ways of thinking about injury prevention such as our Preventable campaign which asks us all to take a moment to think about the consequences of doing something before acting.

In 2019/20, we invested $100 million in injury prevention programmes and we’re achieving a reduction in injury costs of $1.80 for every $1 we spend. 

You can see examples of our injury prevention work on our website. These efforts are seeing results. However, the overall volume and costs of injuries are still increasing. 

Examples of our injury prevention work

Increasing costs to support injuries  

The increasing number of injuries combined with anticipated price increases has resulted in the expected costs to support injured people, over the next three years, increasing by between 4-6% per annum. 

This year we’re expecting $4.63 billion will be needed from levies to support the lifetime costs of injuries that are estimated to happen in 2021/22.  By 2024/25, this is estimated to increase to $5.2 billion.  

Expected New Year Claims Costs                

Cost of supporting new injuries (New Year Claims Cost)

Improving the Scheme 

We’re always seeking ways to be more efficient in how we deliver better health outcomes for our clients while managing our costs.  

Over the past three years, ACC has invested in an online option – MyACC – for clients with less complex needs to manage their recovery. This can provide them with faster access to services and help support a quicker recovery.  

To support people to get well sooner, we’ve also: 

• modernised how we support the co-ordination of services around injured people and their families  
• continued to work with providers of health care services to make it easier for them to work with us and to support their client’s recovery. 

After all these benefits have been taken into account, we still forecast that the total number and costs of injuries will continue to increase.  

ACC is only consulting on the proposed changes to the three levied Accounts.

For the Work and Earners’ Accounts, collected per $100 of liable earnings, we calculate the average levy by taking the New Year Claims Cost and dividing it by the amount workers are expected to get paid. For self-employed people, we use the income liable for ACC levies – after expenses – they will earn.   

For the Motor Vehicle Account – collected from petrol and vehicle registrations – we take the funding we require to cover projected injuries and divide it by the number and type of vehicles we expect to be licensed each year. 

New Year Rates 

 *Capped at the maximum liable earnings for each year. 

**Excludes workers for businesses in the Accredited Employer Programme as they choose to self-insure for a 1 to 5-year period. 

Proposals for the Work Account levy

Proposals for the Earners’ levy 

Proposals for the Motor Vehicle levy

If levies have to increase, the Government’s policy is that we limit the increase of the average levy rate to 5% each year (in addition to an allowance for expected inflation for the Motor Vehicle Account).  There is no limit to the amount levies can reduce each year.

How we approach this step is set out in the Government’s funding policy statement for ACC.  For more detail on how this is applied, see the funding policy statement section below. 

The combined effect of considering the current funding position and the limit on any proposed increases is called the funding adjustment.

Our goal is for levy rates to be as stable and predictable as possible. This means they’ll be more resilient to shocks and will provide certainty for levy payers on how much they’ll pay year-to-year.  We therefore propose gradual adjustments over the next few years.

Our proposed levies over the next three years are shown in the table below.

Recommended levy rates

Applying the funding policy statement’s principles relating to use of surplus funds in Accounts and the capped levy increase (the funding adjustment in the table above) has resulted in recommended levy rates that are up to 43% lower than the levy rates required to fully collect the cost of injuries over the next three years. 

For households and businesses in New Zealand, the proposed levy rates mean the following changes to their weekly costs compared to 2022. 

Examples of the weekly impact of the recommended levies 

Details on the different Accounts can be found below.

Motor Vehicle Account calculations 

Work Account calculations  

Earners’ Account calculations 

Funding policy requirements 

The funding policy requires ACC to consult on levy rates that: 

1. Ensure levies meet the lifetime cost of injuries.  Our levies each year should pay for the entire cost of supporting injured people to recover well from their injuries, regardless of how long the recovery takes. 
2. Meet the government’s funding target for ACC.  Each Account should have equal funds (assets) and costs (liabilities) over the long term, to reflect the lifetime impact of some injuries i.e. how long an injury will impact a person’s ability to return to work.  When an Account has a surplus or deficit of funds, the average levy rate must be adjusted to return the Account to the target funding position of 100%.   
3. Spread necessary changes over ten years. Our long-term approach provides more levy stability.  We adjust the average levy rates by small amounts over 10 years to return each Account to its target funding position.  This requirement means only a fraction of any surplus funds can be used in any year to lower the average levy rate because we need to spread the surplus over 10 years.  This also applies if the Account has a deficit of funds i.e. we can only collect a fraction of the deficit each year of the 10-year period to avoid big levy increases. 
4. Cap annual increases.  The average levy rates are limited in how much they can increase each year to 5% for the Earners’ (workers) and Work (businesses) Accounts.  The average Motor Vehicle Account (vehicle owners) levies can increase by 5%, in addition to an allowance for expected inflation adjustments each year. 

Calculating levy rates for each Account 

All three Accounts (Earners’, Work, and Motor Vehicle) currently have a surplus of funds and already have their current levy rates set well below the New Year Rate to correct this. 

Continuing to collect levies below the cost of injuries each year is not sustainable over the long-term.  

ACC’s strong investment performance allows us to slow the growth of the levy rates but isn’t enough to keep levies at the current level.  We need to start closing this funding gap to avoid future generations having to pick up the bill for today’s injuries.  

We start by forecasting the cost of future injuries (the New Year Claims Cost) to calculate the New Year Rate required to fully pay for the cost of injuries for the year.   

As our Accounts have surplus funds, we’re able to use part of that surplus to fund the costs of new injuries.  

If the New Year Rate minus the adjustment for surplus funds is still higher than the current average levy rate, we’d have to recommend an increase in levies.  This is where the cap on annual increases, limiting how much the average levy rate can increase, comes into play.   

Levy calculations

Applying the funding policy statement has meant $2.80 billion of the surplus funds across the Accounts will be used to lower levies over the next three years. 

After applying the surplus funds, the adjusted New Year Rate for the Earners’ and Motor Vehicle Accounts is still higher than the maximum increase allowed under the funding policy statement. However, the cap on annual levy increases has reduced levies below the New Year Rate by a further $801 million. 

Combined, this levy adjustment means our proposed levy rates for the next three years will remain up to 43% below the cost of injury for the different levied Accounts.