ACC for Self-Employed NZers: Levies, Cover, and How to Reduce Your Costs

If you are self-employed in New Zealand, ACC is not optional. You pay levies on your earnings, and in return you receive cover for injuries — whether they happen at work, at home, or anywhere else.

But most self-employed people do not fully understand what they are paying for, how the levy is calculated, or what they can do to reduce the cost. This guide covers all three.

ACC covers the cost of treatment and rehabilitation for injuries caused by accidents. For self-employed people, this includes:

• Medical costs — GP visits, specialist appointments, surgery, physiotherapy, and other treatment related to an injury
• Weekly compensation — if an injury prevents you from working, ACC pays 80% of your earnings (up to the maximum threshold) while you recover
• Lump sum compensation — for permanent impairment resulting from an injury
• Rehabilitation support — vocational rehabilitation, home modifications, and other support to help you return to work

Importantly, ACC does not cover illness — only injuries. If you are unable to work due to a health condition rather than an accident, ACC will not pay. This is a significant gap for self-employed people who do not have sick leave or income protection insurance.

Self-employed people pay two ACC levies:

The work levy is based on your industry classification (called a classification unit) and your liable earnings. Different industries carry different risk profiles — a builder pays a higher work levy than an accountant because the injury risk is higher.

Your classification unit is assigned based on the nature of your work. If you do multiple types of work, you should be classified under your primary activity. If you believe you have been placed in the wrong classification, you can apply to have it reviewed.

The earners' levy is a flat rate applied to all earners, regardless of industry. It covers injuries that happen outside of work — at home, playing sport, or anywhere else.

Both levies are calculated on your liable earnings — broadly, your self-employment income up to the maximum liable earnings threshold (currently $142,283 per year). Earnings above this threshold are not subject to ACC levies.

Your liable earnings are based on your income from the previous tax year, as reported to IRD. This is why your ACC invoice arrives in July or August — ACC uses your prior-year income to calculate the levy.

Several factors can make an ACC invoice larger than expected:

• Income growth — if your income increased significantly last year, your levy will be higher this year
• Industry reclassification — if ACC has changed your classification unit, your work levy rate may have changed
• First year of self-employment — ACC uses a default income figure for new self-employed people, which may be higher than your actual income
• Minimum levy — even if your income was low, ACC charges a minimum levy

If you received a large invoice and believe it is incorrect, you have the right to request a review. See our post on why your ACC invoice is so high for more detail on the calculation and how to challenge it.

By default, self-employed people are on standard ACC cover. Weekly compensation is based on 80% of your prior-year earnings, up to the maximum threshold. This is the baseline — it is automatic and requires no application.

CoverPlus Extra is an optional product that allows you to agree a fixed weekly compensation amount with ACC, regardless of your actual earnings at the time of injury. This is particularly useful if:

• Your income fluctuates significantly year to year
• You are in the early stages of building a business and your recent earnings do not reflect your earning capacity
• You want certainty about what you would receive if you were injured

The premium for CoverPlus Extra is based on the agreed compensation level. You can set it higher or lower than the standard cover amount, depending on your needs and budget.

CoverPlus Extra requires an application and ACC approval. It is worth considering if the standard cover amount would leave you financially exposed.

If you want additional cover beyond what ACC provides — for example, income protection for illness as well as injury — you will need to arrange private insurance separately. ACC does not cover illness, and the gap between ACC weekly compensation and your actual income can be significant.

If you are classified in a higher-risk industry than your actual work warrants, you are overpaying. Review your classification unit and apply for a change if it does not accurately reflect your work.

If your income this year is significantly lower than last year — due to a business downturn, parental leave, or other reasons — you can apply to ACC to have your levy based on your current year's expected income rather than the prior year. This requires an application and supporting evidence.

If you are on CoverPlus Extra with a high agreed compensation level, consider whether that level still reflects your needs. Reducing the agreed amount reduces the premium.

ACC levies are based on your income as reported to IRD. If your income has been over-reported — for example, if business income has been included that should not be — your levy will be higher than it should be. Make sure your tax returns accurately reflect your self-employment income.

ACC offers a discount for paying your invoice in full by the due date. If you pay in instalments, you pay more overall.

Medical professionals — doctors, dentists, physiotherapists, and others — often have specific ACC considerations, including:

• Higher work levy rates due to the nature of clinical work
• ACC contracts for providing treatment to ACC claimants
• Specific cover considerations for locum and contractor arrangements

See our posts on ACC levies for doctors and ACC levy reviews for medical practices for more detail.

Eastmure & Associates works with self-employed professionals and small business owners throughout New Zealand. If you have questions about your ACC levies or want to review your cover options, get in touch.