2021 Levy Consultation > Should we increase the maximum and minimum earnings we levy?

Recommendations to the Minister

Should we increase the maximum and minimum earnings we levy?

We propose increasing the threshold for maximum and minimum earnings people pay levies on to align with changes to labour costs and minimum wages.

Agree

Disagree

Responses

Liable earnings (Work and Earners’ levies) 2022-2025

Your ‘liable earnings’ as a business or an individual will determine the amount you pay in ACC Work and Earners’ levies. The term ‘liable earnings’ describes the income you pay your ACC levies on. ‘Liable’ refers to any income that does not fall below the minimum, or go above the maximum, thresholds.

For employees, liable earnings are wages or salaries you earn in a financial year.
For employers, liable earnings are the wages or salaries you pay your employees in a financial year. This amount is shared with us from your payroll department or Inland Revenue.
For self-employed people, liable earnings are the income you earn in a financial year as declared on your end-of-year tax returns.

You don’t need to pay levies on earnings from investments or trusts, as these are considered ‘passive income’. This is income you’d still receive if you couldn’t work due to an accident.

Why maximum and minimum liable earnings are set

Every year maximum (currently $130,911) and minimum (currently $36,816) amounts are set for the earnings that people working full-time – more than 30 hours – are liable to pay ACC levies for. If you earn over the maximum amount, you don’t pay anything beyond this limit – you just pay a levy on your earnings up to that point.

These increases also apply to weekly compensation entitlements for those that have been injured and are unable to work.

Why maximum amounts are set

The amount of weekly compensation is capped at 80% of the maximum liable earnings. Nobody gets paid more weekly compensation than this, so it would not be fair to charge a levy beyond this.
This means high earners contribute an amount proportional to the weekly compensation they would receive if they were injured and couldn’t work.

Example: Someone with an income of $200,000 would only pay levies based on the maximum liable earnings (currently $130,911). If they are injured and unable to work, their weekly compensation entitlements would be 80% of the maximum liable earnings and not their full income.

Why minimum amounts are set

A minimum level of earnings is set to ensure self-employed people who work full-time and earn less than this amount can still receive the support they need if they’re injured. For example, if you’re newly self-employed you may not be making a profit straight away. Paying a Work Account levy on the full-time minimum ensures that if you have an accident and can’t work, you’ll still receive weekly compensation even though you haven’t been earning at that level. In this case, the amount of weekly compensation is up to 80% of the full-time minimum amount.
The minimum level of earnings is also applied to the eligibility criteria in the No Claims Discount programme for small businesses and self-employed people.

Proposal to increase both the maximum and minimum amount

We propose to update the maximum amount in line with changes in the labour cost index and the minimum amount in line with the labour cost estimate and current minimum wage changes. Based on this, we’re proposing the following changes to the maximum and minimum liable earnings that you pay your ACC levies on and to weekly compensation entitlements (up to 80% of liable earnings).

	From (current amount)	Proposed for 2022-23 levy period	Proposed for 2023-24 levy period	Proposed for 2024-2025 levy period
Maximum	$130,911	$136,544	$139,384	$142,283
Minimum	$36,816	$42,465	$43,349	$44,250

Maximum liable earnings applies to the levies, and weekly compensation entitlements, for everyone.

Minimum liable earnings apply to the levies for self-employed and sole traders only. The minimum is also used to determine eligibility for the No Claims Discount programme for small businesses.

Note: Employees include private domestic workers. A private domestic worker is a person who works for another person (an employer) in the employer’s home. Private domestic workers include home-helpers, caregivers, nannies and gardeners. They’re specifically mentioned in the legislation alongside employees. You’re not a private domestic worker if you provide an ACC client with attendant care.

1 Sep 2021

Open for feedback

Tell us what you think about our proposals.

5 Oct 2021

Consultation closes

We’ll review and consider all feedback submitted to us.

Nov 2021

Recommendations to the Minister

Taking account of what you tell us, we’ll make recommendations on levy rates to the Minister for ACC.

Dec 2021

Final decisions by Government

The Government will make the decision on final levy rates, which will take effect next year and be in place for three years.

Agree

40%

Disagree

60%

40%

Agree

40%

Disagree

60%

Those people affected may be able to afford the increase.

The proposal focuses on what you have to pay (if you earn above the old max) - but the flipside means you can also get paid more if you have an accident. With the rising costs of living for households, I think this is fine.