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ACC Launches 2005/06 Year Levies Consultation

Media Release

5 August, 2004

ACC launches 2005/06 year levies consultation

ACC's 2005/06 year levy setting process began today with the release of proposed rates for public consultation.

Chief Executive Garry Wilson said another excellent year for investment returns had boosted scheme reserves and enabled ACC to propose average levy rates little changed on last year.

"We expect to be able to confirm a very strong year for ACC when we report at the end of the month, both operationally and from investments," Mr Wilson said.

"This strong performance gives us optimism that the proposed rates are sustainable," he said.

Under the proposals, average levies for key employer, earner and motorist schemes remain unchanged. The average levy for the smaller self-employed group, however, goes up by 2.9 percent.

ACC is also exploring discount options that would enable self-employed people and employers with less than 20 staff with demonstrated workplace hazards management practices to be rewarded with a levy discount of up to 10 percent.

If an incentive scheme were adopted, it would most likely be implemented in the 2006/07 year and would initially be offered in highest injury sectors.

Although proposed composite average levy rates are mostly unchanged, some industries will fare better than others, depending on their injury experience.

For a significant number of farmers who operate in a company structure, there would be a small decline in levy (down 3 percent).

For the self-employed farmers, however, there would be a 9 percent increase, reflecting the rising cost of injuries in their sector as well as reduced earnings over which claim costs are collected.

Mr Wilson said the increase was regrettable, but would only change as self-employed farmers take injury prevention more seriously, reduce their injury rates and stop maiming and hurting themselves.

Mr Wilson said he was pleased farmers had acknowledged their high injury risk, with 10,000 attending FarmSafe courses over the last 18 months.

"Safer farms will not happen overnight," he said. "Farm hazards are many and varied and their management demands day-to-day awareness that is best when reinforced by families and dependants," he said.

Summary of proposed levy rates for 2005/06 (GST exclusive) Who pays Levy component Current 2004/05 average Proposed 2005/06 average
Proposed change
Employers* Composite Levy (for every $100 of payroll) $1.21 $1.21 No
change
Which consists of a:
Work levy $0.91 $0.8
Pre-1999 claims levy $0.30 $0.33
Self-employed people* Composite Levy (for every $100 of earnings) $3.10
$3.19 +2.9%
Which consists of a:
Work levy $1.73 $1.79
Pre-1999 claims levy $0.30 $0.33
Non-work levy $1.07 $1.07
All earners – through Inland Revenue Non-work levy (for every $100 of
earnings) $1.07 $1.07 No change
Motorists – through annual vehicle licensing fee & levy on petrol Motor
vehicle levy (per motor vehicle) $197.50 $197.50 No change
* Note: These are average rates. Individual rates for industry groups may
increase or decrease based on recent experience.


Employers

The proposed average composite Employers levy is unchanged at $1.21 as a 3c rise in the pre-1999 claims levy is offset by an equal decline in the work levy component. Higher than expected levy income and returns on investments in 2003/04 have boosted Employers' Account reserve levels to above target.

It is proposed to preserve ongoing levy stability by using the additional reserves to offset increased levies charged for the pre-1999 claims and to fund small increases in work-related claim and scheme costs. The pre-1999 claims levy covers the ongoing cost of injuries that occurred before 1 July 1999and is set at a level sufficient to build reserves to fully-fund those injuries by 2014. Since July 1999 levy rates have been assessed on a full funded basis. Prior to July 1999 ACC operated under a Pay-As-You-Go funding basis which resulted in the future claim liability of pre-1999 claims not being matched by reserves.

The proposed levy will rise from 30 cents per $100 of liable earnings to 33 cents, due to upward revisions in the expected time injured claimants will be on the scheme and correspondingly higher rehabilitation and treatment costs.

Self-employed

Increasing trends in the number of new claims expected to be received and a decline in the self-employed earnings over which to cover claim costs has driven the need to increase the self-employed levy rate. The proposed average composite self-employed levy rises from $3.10 in 2004/05 to $3.19.

Earners

The earners levy covers non-work injuries. Excellent investment returns have resulted in higher than required reserves and so it is proposed to maintain the non-work levy at the current level despite rising claim numbers and additional costs.

Motorists

The proposed average composite motor vehicle levy will remain unchanged at $197.50. The impact of higher interest rates and an increase in the number of registered vehicles, both of which tend to reduce levy rates, has been offset by an increase in the number and cost of claims received.

Workplace safety incentives

Levy discount safety incentives are currently available to medium and large employers, but not for small businesses and the self-employed who pay levies on the basis of the collective risk of their industry group.

The small employer and self-employed safety incentives might initially be offered to agriculture, forestry, construction, road freight and motor trades sectors. These high-risk sectors collectively account for 45 percent of small business claims and 49 percent of cost.

"Small employers and the self-employed have more claims relative to staff numbers and earnings and their injuries tend to be more severe. This is particularly so for the self-employed," Mr Wilson said.

Submissions

Interested parties have until 16 September to make submissions. When submissions have been analysed, the ACC Board will make recommendations in October to the Government via the Minister for ACC, with the final rates being announced towards the end of the year.

ENDS

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