ACC

Understanding ACC: Key Considerations for Self-Employed and Contractors in Aotearoa

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What is ACC? ACC (Accident Compensation Corporation) is New Zealand’s largest government-run insurance provider, funded through levies paid by individuals and businesses.

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Making the Most of ACC Coverage Since ACC levies are mandatory, it’s essential to maximize your entitlements when it’s time to claim. Here’s what contractors and self-employed individuals need to know to get the best value from their ACC coverage.

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Common ACC Pitfalls for Self-Employed and Contractors

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01.Incorrect Classification Codes

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• Misclassifications in ACC’s levy system can lead to significant overcharges for New Zealand businesses, especially small businesses where ownership and roles are mixed, such as a plumbing business where one partner manages administration while the other handles operations. ACC assigns levy rates based on a Business Industry Classification (BIC) code, which is initially selected when businesses register with Inland Revenue. This BIC code determines the classification unit (CU) that groups businesses with similar risks to calculate appropriate levies. However, errors often occur because ACC lacks the resources to verify every business classification thoroughly. Misclassifications mean that businesses are sometimes assigned to higher-risk categories, thus paying higher levies than necessary. ACC advises that businesses periodically review their CU and make corrections if needed, as ensuring an accurate classification could yield substantial savings on levies.

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02.Default ACC Scheme vs. ACC CoverPlus Extra

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• The standard ACC scheme may not be ideal for self-employed individuals or sole traders. An alternative option, ACC CoverPlus Extra, offers substantial benefits, including a pre-agreed cover amount without the need to prove your income at the time of a claim. Additionally, ACC CoverPlus Extra continues to pay your full entitlement if you return to part-time work or if your business continues to generate income. For most self-employed people, this is a more advantageous choice.

 

03.Gaps in Coverage for Illness

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• ACC only covers accident-related events. For self-employed individuals or sole traders, this means income may stop entirely if you’re unable to work due to illness, as ACC doesn’t provide income support for non-accidental medical leave. This is a key reason why many self-employed people opt for private insurance to fill in the gaps where ACC falls short.

 

Switching to ACC CoverPlus Extra

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ACC CoverPlus Extra is typically a beneficial option for self-employed individuals. Switching to this plan is straightforward and can often reduce your levy payments, depending on your cover amount and occupation code. There are very few cases where ACC CoverPlus Extra isn’t preferable for self-employed or sole traders.

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