That’s the bare basics covered, but you also need to understand more to make sure you’re being charged the right amount. Part of that includes being able to interpret your ACC invoice and knowing what to do if you get a credit note from them. There’s also an optional type of cover to consider. 

This guide is designed to help you understand the ins and outs of ACC invoices, so you can budget for when they arrive and so you can avoid the stress of not knowing what’s going on. Let’s start with the benefit of ACC cover and the various levies you have to pay.

What’s the point of ACC?

ACC is a bit like insurance. Hopefully you’ll never need to use it, but in the meantime it gives you peace of mind. It also ensures everyone in New Zealand will be taken care of if they’re injured and can’t work. In that way ACC helps to build a decent society we can all enjoy. However, it only covers time off work for accidental injury not illness. You need something like income protection insurance for that.

How do ACC levies work?

Anyone who earns an income or owns a business has to pay ACC levies. When you work for an employer, they take your ACC Earners’ levy out of your pay and send it to ACC, along with their own levies as an employer. It works just like PAYE income tax; you don’t have to do anything.

However, when you earn self-employed income you have to pay your own ACC Earners’ levy, as well as the levies an employer would pay on that self-employed income. This applies even if you’re also earning PAYE income from an employer in a full-time or part-time job.

Why are there three different levies?

Each levy has a different purpose, and one of them is affected by the type of work you do and how risky it is in terms of work-related injury.

Your annual self-employed ACC invoice includes three levies:

Earners’ levy – this helps to pay for the cover ACC provides for injuries that are not work-related, such as a sports/gym injury or even a fall when you’re out shopping. For the 2022/23 tax year you’ll pay a rate of $1.27 per $100 of liable income (see below). This rate is set to rise to $1.33 the following year and $1.39 the year after that.

Working safer levy – this helps to fund Worksafe NZ, the regulator charged with improving workplace health and safety.
You pay a rate of $0.08 per $100 of liable income.

Work levy – this helps to pay for the cover ACC provides for work-related injuries. The rate you pay per $100 of liable income depends on the type of work you do.

When you earn PAYE income, your employer pays the Working Safer levy and the Work levy from their funds. When it comes to self-employed income, you pay for them.

What does ACC liable income mean?

Liable income refers to your taxable income. When you’re self-employed that’s usually your earnings minus your business-related expenses for the year. In addition, ACC sets a minimum and maximum value each year. For the 2022/23 tax year they are $42,465 and $136,544 respectively.

When you’re self-employed:

  • If your taxable income is more than the maximum, ACC just uses the maximum limit value when calculating your levy
  • If you work full-time (more than 30 hours a week on average over a tax year) and your taxable income is less than the ACC minimum, they use the minimum limit value
  • If you work part-time (30 hours a week or less on average over a tax year) and your taxable income is less than the ACC minimum, they’ll use your actual taxable income

If you have some self-employed income and some PAYE income, and the separate liable incomes that ACC has used add up to more than the maximum limit, you can apply to Inland Revenue for a ‘multiple employer adjustment’.

How does ACC know how much you’ve earned each year?

When you’re self-employed you file your own tax return each year. You also have to keep records of all income and claimed expenses for seven years.

Each year, Inland Revenue passes your tax return information to ACC. This means ACC knows the taxable income you have declared (actual income minus expenses), so they can calculate your levies and send you an invoice.

How does ACC know your type of work or industry?

When you file your income tax return or register for GST with Inland Revenue, you choose a Business Industry Classification (BIC) code that best describes your business activity. Inland Revenue passes this to ACC, along with your other tax return information. ACC uses your BIC code to give you a classification unit (CU), which determines your worker levy rate per $100 liable income.

If ACC doesn’t know your BIC code, they will use the default code, which is ‘manufacturing’. This leads to a classification unit with one of the highest levy rates.

You can check your assigned CU on the MyACC for Business website. If you need to change it, you simply let ACC know what your correct BIC code is. They’re all listed on the Business Industry Classification Code website.

If you didn’t spot the mistake until after ACC sent you your first invoice, you can correct the code with ACC and they’ll send you a credit note. You then pay the difference between your original invoice and the credit note amount.

What are the two options for self-employed ACC cover?

The default cover for self-employed people is called ACC CoverPlus (CP). It provides weekly payments based on up to 80% of your taxable income if you’re no longer able to work due to injury.

The other option is ACC CoverPlus Extra (CPX). You have to tell ACC if you want this one instead of the default CoverPlus. CoverPlus Extra lets you choose the maximum income you would receive as cover. It’s called your ‘agreed level of cover’. The lower it is, the lower your invoice total will be. You can reduce the levy a little further by choosing the ‘CPX option’, which means your weekly cover payments will reduce as you return to part-time work after being off work due to injury.

Pro tip: While CoverPlus Extra can look like a good way to save money when you’re starting out and finances are tight, you need to be very careful. There’s no point paying for cover that wouldn’t let you pay your bills and get back on your feet again. In fact, the time you’re most likely to need full cover is when money is tight and you don’t have a good cash emergency fund to rely on.

Invoice dates

  • CoverPlus invoices are issued in September and include all three levies
  • CoverPlus Extra invoices are issued in April for the year ahead, you also get a separate invoice for your Working Safer levy

Next steps

This article has explained the main fields you’ll see on an ACC CoverPlus or CoverPlus Extra invoice, and how to check you have been charged correctly. It pays to get independent financial advice before choosing an option like CoverPlus Extra. 

Afirmo’s handy business set up tools make it easy to get everything sorted and recorded in one place. This includes registering with ACC ahead of time, so you can provide correct information and know what to expect before your first invoice arrives. 

Check out the Afirmo Business Set up Tool.