ACC bills can be notoriously confusing for the self-employed (Photo: Alice Webb-Liddall)
ACC bills can be notoriously confusing for the self-employed (Photo: Alice Webb-Liddall)

OPINIONMoneyOctober 14, 2020

Here’s why ACC is confusing for the self-employed

ACC bills can be notoriously confusing for the self-employed (Photo: Alice Webb-Liddall)
ACC bills can be notoriously confusing for the self-employed (Photo: Alice Webb-Liddall)

ACC has just started issuing their first bills to self-employed people for two years, and it’s exposed major shortcomings in the ACC levy system, writes James Fuller.

In the last week or so, thousands of self-employed New Zealanders will have received their first ever ACC bill. For many it will be a confusing and frustrating experience.

Unlike those working in salaried employment who pay their ACC contributions via PAYE taxes, self-employed workers must pay ACC separately, as an annual bill.

Based on the type of work an individual does, ACC charges them a percentage of their taxable income as ACC Levies. These taxes go towards paying for medical cover for work and non-work related injuries, and the more “high risk” the type of work, the higher the ACC levies they’ll have to pay.

Last year ACC didn’t send out any bills, as they were resetting their billing cycle to work differently, which means that anyone who has become self-employed at any time within the last two years has just received a surprise bill from ACC, expecting payment to be made within a month. Some of these bills already threaten the use of debt collection agencies if they’re not paid on time.

If an individual hasn’t regularly kept their information up to date with ACC, they may not even receive the bill to the correct postal or email address, meaning that a visit from the debt collectors could be the first they hear of things.

For many recently self-employed people, these bills will not only be unexpected, they’ll possibly be very confusing, and the information on them can potentially be highly inaccurate. They may find that ACC has them listed with a completely incorrect job type – meaning their bill could be a lot higher than necessary, or a lot less than is actually required!

Most affected people will inevitably call in to ACC to clarify things, so no doubt the ACC call centre is “currently experiencing higher than normal call volumes”.

A call to ACC won’t make things much clearer unfortunately. Anyone looking to get an accurate bill from ACC by updating their job type will be faced with even further confusion. The list of “industry standard” job types that ACC has you choose from is hugely outdated, and is more relevant for registered companies, rather than self-employed individuals.

Further frustration awaits you if you happen to earn income from a couple of different types of work, as the ACC levy system can only support individuals having one type of job per financial year. That’s right – only one type of work every 12 months.

So, if for ten months of the year you were working as a graphic designer, and then for the last two months you became a digger driver, and you then told this to ACC, they would charge you as though you’d been a digger driver for the entire year. How is that fair, or accurate?

These days people are earning their income in a multitude of different ways, doing many different types of work – sometimes on a daily basis. The fact that ACC can only support one per year just shows how out of touch the policies are.

So it’s hard to find a job type that fits, and it’s impossible to have more than one job type in a year. So perhaps we should all just ignore it and just accept whatever job type ACC decides to default us to? Unfortunately, accepting the default is no better. The standard default ACC job type is “manufacturing” – one of the highest levy rates – so accepting the default can leave individuals seriously, and unnecessarily out of pocket.

The whole point of the ACC levy system was to have everyone contribute an amount based on the risk profile of the sort of work they do, but why should we bother having a levy system at all if the data is consistently so inaccurate?

Given that 15% to 20% of Kiwis are earning some or all of their income outside of salaried employment, and the vast majority have no need to be a “company” we should be properly overhauling the ACC system to better cater for individuals, rather than expecting them to fit into an outdated model that assumes everyone who isn’t in salaried employment is running a company.

Perhaps we should significantly simplify things, and implement a blended levy rate across everyone, or have a simpler levy system with a handful of bands based on the different types of work individuals might do. That would certainly be preferable to the mess and confusion of the current setup.

There’s no doubt that ACC in itself is a fantastic thing. It is a fundamental part of New Zealand’s healthcare system, and provides cover and support to hundreds of thousands of everyday Kiwis. However the way the levy system is set up, and in particular, the fact that it hasn’t evolved to meet the needs of individuals who earn income independently, means that right now it is woefully out of touch with modern ways of working.

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