What is credit interest
The Work levy payable by an employer is calculated on the amount of earnings paid by that employer to their employees, during the applicable year.
Credit interest is applied when the amount collected through provisional levies (invoices based on an estimate of the levies payable) is more than $1,000 higher than the final levy assessment. ACC does not charge employers interest if provisional levies are less than the final levies.
Self-employed and private domestic workers are not charged provisional levies, so aren’t eligible for credit interest.
Current approach to credit interest
ACC issues a provisional levy invoice. At the end of the levy year, we issue a final levy invoice, including the balance of any underpayment. If an employer has overpaid levies by more than $20, we refund or credit any overpayments.
Currently the rate of credit interest is 6% per annum. We have held this credit interest rate consistent for several years. However, given current low interest rates in New Zealand, this rate is no longer representative of the wider market. We’re therefore proposing to change the credit interest rate which applies to levies.
We’re proposing to update the credit interest rate payable to align to the three-year Government Bond Rate. This is currently 0.925%.
How it would work
As ACC is recommending levy rates for three years to provide certainty to levy payers, this means the credit interest rate will also be locked in for three years.
- The rate of credit interest payable would be set as a fixed rate in the Work Account regulations based on the three-year Government Bond Rate that is in place when the proposal is approved.
- This rate would next be reviewed in 2024 for the 2025/26 levy year.
Setting a single rate of interest payable for three years means that businesses who overpay their levies could be unfairly advantaged or disadvantaged, depending on the movement of future interest rates.
PAYE employers can ensure their provisional invoice is as close as possible to their end-of-year levy by providing ACC with an estimated payroll update. This reduces the chance of significant overpayment or underpayment of levies at the end of the year.
Your estimated payroll can be updated at MyACC for Business, via phone or email.