New ACC levies provide ongoing stability
New ACC levies provide ongoing stability
Average composite ACC levies for employers, self-employed and earners will remain the same or decrease for 2003/2004, ACC Minister Ruth Dyson said today.
Announcing the 2003/2004 levies, Ms Dyson said the average composite employers’ levy would decrease from $1.25 to $1.21 per $100 payroll, while the average composite self-employed and earners’ levies would remain at $3.30 and $1.20 respectively, per $100 liable earnings.
“The new levies will provide ongoing stability for businesses so that they can plan ahead with certainty. At the same time, they will enable ACC to carry on with its strong injury prevention focus, and provision of effective rehabilitation and fair compensation for people who are injured.”
Ruth Dyson said the motor vehicle levy would increase by 25 per cent, from $169.67 to $211.95
“The increase is primarily to cover better estimations by ACC of long-term costs of rehabilitation and treatment for seriously injured claimants. It will be funded through an increase in excise duty on petrol from 2.03 cents to 5.08 cents a litre. For the average motorist, this represents an extra $41.61 a year in petrol costs.”
Ms Dyson said it was fairer to increase petrol duty than the other source of the ACC motor vehicle levy, a portion of the annual vehicle licence fee.
“The more you drive, the more likely you are to be injured. Petrol usage is the most accurate indicator of the amount of time a motorist spends on the road and is therefore the fairest indication of exposure to risk.”
Ruth Dyson said ACC levies were low compared with overseas premium rates, including those in Australia.
“In July 2002, Australian motor vehicle premium rates, averaged across all states, were $A325 ($NZ355) a year for third party injury only. This is more than twice as much as the current ACC motor vehicle levy of $NZ169.67 which covers all injuries in motor vehicle crashes.”
Ms Dyson said while ACC’s average employer and self-employed levies were stable, many businesses overseas were facing premium increases of up to 500 per cent.
“The ACC scheme has cushioned New Zealanders against the impact of world-wide hikes in premiums which have resulted partly from the fall-out from September 11th and the failure of private workplace insurers like HIH in Australia.
“It is useful to note that HIH provided 25 per cent of workplace cover in New Zealand during ACC’s period of privatisation under the National Government.”
The new ACC levies come into effect on 1 April 2003, with the exception of the motor vehicle levy which comes into effect on 1 July 2003.
A background paper explaining the ACC levies in more detail is attached.
The new levies by industry classification will be available in the ‘products and levies’ section of ACC’s website: acc.co.nz/productslevies from 6pm, 18 December 2002.
2003/2004 ACC LEVIES – BACKGROUND PAPER
EXECUTIVE SUMMARY There is very little change
in the levies in most ACC accounts for 2003/2004, with the
exception of the motor vehicle levy (see table, page 2).
The composite motor vehicle levy (vehicle licence fee levy + petrol excise duty) will increase by 25 per cent from 1 July 2003. For petrol-powered vehicles, the motor vehicle levy increase will be funded by increasing the excise duty on petrol.
Collecting the increase through petrol duty will ensure that people who do the most driving (ie with the highest exposure to risk) pay the greatest share of costs.
There will be no increase in the vehicle licence fee levy for standard petrol-powered motor vehicles.
There will be no increase in the vehicle licence fee levy for petrol-powered motorcycles 61cc and greater.
The average composite employers’ levy will reduce by 4c per $100 payroll. The average composite self-employed levy will remain the same.
The average earners’ levy will remain the same.
The new levies take effect from 1 April 2003, with the exception of the motor vehicle account which takes effect from 1 July 2003.
All levies exclude GST with the exception of the earners’ levy, which is GST inclusive.
The new levies can be found in the ‘products and levies’ section of ACC’s website: http://www.acc.co.nz/productslevies
ACC accounts ACC
is required to operate seven separate scheme accounts. Each
account receives levies from a different source. Each source
funds the cost of claims made under that account.
The accounts are:
Employers: funded by employers as a percentage of payroll, for all work-related injuries, except those to self-employed people.
Self-employed: funded by self-employed people based on the level of income earned, for all work-related injuries to self-employed people.
Earners: collected by IRD through the PAYE system, for all non-work injuries to earners.
Motor vehicle: collected as part of the motor vehicle licence fee and as an excise tax on petrol; covers all injuries involving motor vehicles on public roads.
Residual claims: paid by employers and self-employed to fund the cost of work injuries before 1 July 1999, and non-work injuries to earners before 1 July 1992.
Non-earners: funded by the government to meet the costs of injuries to people not in paid work.
Medical misadventure: funded from the earners’ and non-earners’ accounts to cover the costs of medical misadventure claims.
ACC LEVIES 2003/2004
Levy New rate 2003/2004 Current rate 2002/2003
Employer Employers’ Account per $100 payroll (average)Residual Claims Account per $100 payroll (average) Composite employer levy (average) $0.90 $0.31 $1.21 $0.90 $0.35 $1.25
Self-employed Self-employed Work Account per $100 liable earnings (average)Residual Claims Account per $100 liable earnings (average)Earners’ Account (for non work-related injuries)Composite self-employed levy (average) $1.79 $0.31 $1.20 $3.30 $1.75 $0.35 $1.20 $3.30
Earner Earner’s Account per $100 liable earnings (average) (for non work-related injuries) Earner’s levy (average) $1.20$1.20 $1.20$1.20
Motor vehicle Levy for standard petrol-powered motor vehicle Petrol excise duty Composite motor vehicle levy (average) $141.105.08 cents per litre (average motorist: $70.73 per year)$211.95 $141.102.3 cents per litre (average motorist: $29.12 per year)$169.67
Motor cycle Vehicle licence levyPetrol excise duty $211.665.08c per litre $211.662.3 cents per litre
All rates are GST exclusive, except the earners’ levy which is GST inclusive. BACKGROUND New Zealanders fund ACC through levies set by the government. The levy rates are set each year by the government, following consultation. Levies are set to meet the total cost of rehabilitation and compensation entitlement for injured people, the cost of managing the ACC scheme, and running injury prevention and other programmes. The principles underlying the setting of levies are based on the Woodhouse principles and include: ensuring long-term levy stability to allow businesses to plan with certainty; combining community and individual responsibility; and maintaining strong injury prevention programmes and incentives for employers and individuals.
Pay-as-you-go v full funding
Before 1 July 1999, ACC levies were collected on a ‘pay as you go’ basis. This meant that only enough funds were collected each year to meet the costs of managing claims in that year. No reserves were required to fund long-term liabilities for claims.
Since 1 July 1999, ACC levies have been collected on a ‘fully funded’ basis. This means that levies are set to cover both the immediate and future lifetime costs of injuries that happen in each levy year. ACC is required to achieve full funding of all claims (including historic claims) by 30 June 2014, and is slowly building its reserves to do so.
ACC does not make a profit. Any surplus (where more levy
income is collected than required) is added to reserves for
future use. Any shortfall means that ACC has to dip into
the reserves previously collected.
Levy-setting process ACC consults on proposed rates (the consultation period for the 2003/2004 levies was 12 September-10 October 2002). ACC Board recommends rates to the ACC Minister. Government considers ACC’s recommendations, taking additional advice from the Dept of Labour which provides strategic policy direction and process oversight of ACC. Government decides on new rates for 2003/2004. New levy rates are announced.
ACC levies are low compared with premium rates for injuries overseas. The ACC scheme has cushioned New Zealanders against the impact of world-wide hikes in premiums, partly as a result of the fall-out from September 11 and the failure of private workplace insurers like HIH in Australia. HIH provided 25 per cent of work-place cover in New Zealand during ACC's period of privatisation under the National government. While ACC’s average employer levies are stable, many businesses overseas are facing premium increases of up to 500 percent. In Britain and Australia, some businesses are facing even greater increases. Average employer premium rates in Australian states over the last two to three years range from $A1.55-$A3.04 per $100 payroll, compared with ACC's composite employers’ levy of $1.21 in 2003/2004. In July 2002, Australian motor vehicle premium rates, averaged across all states, were $A325 (NZ$355), compared with the average 2002/2003 ACC motor vehicle levy of $169.67.
CHANGES TO ACC LEVIES BY ACCOUNT EMPLOYERS’ ACCOUNT
Current levy (average) $0.90
ACC recommended levy for 2003/2004 $0.89
Dept of Labour recommended levy for 2003/2004 $0.90
Approved levy for 2003/2004 (average) Per $100 payroll $0.90
The Employers’ Account levy will remain at its current rate for 2003/2004. This reflects the fact that the number and average cost of new work injuries is consistent with previous years. The Residual Claims Account levy will decrease by 4c per $100 payroll for 2003/2004 (see Residual Claims account). The composite levy paid by employers will decrease from $1.25 to $1.21 per $100 payroll.
Background The Employers’ Account levy funds the cost of work-related personal injury claims that occur after 1 April 2001. Employer levies have remained at the same rate for the last two years. The levies are averages only. Each business activity is given an industry classification. There are 550 industry classification units, currently more broadly grouped into 130 risk groups. An employer’s actual levy may differ from the average, depending on their industry classification, the risk rating and recent claims history of their risk group, and whether they are receiving discounts through the ACC Partnership Programme or ACC Workplace Safety Management Practices (see below). Some employers’ levies may decrease. This will reflect a reduction in the number and/or cost of injuries in their risk group. Movement between groups may also occur where risk ratings are re-aligned. The average employer premium rates in Australian states over the last two to three years range from $A1.55-$A3.04 per $100 payroll, compared with ACC's composite employers’ levy of $NZ1.21 in 2003/2004.
Other employer levy initiatives
Workplace Safety Management Practices Programme: Employers can receive a levy discount of 10–20 per cent if they meet and maintain workplace safety standards under the Workplace Safety Management Practices Programme. The average discount is equivalent to $0.05 per $100 payroll ie $0.85 per $100 payroll. ACC Partnership Programme: Employers wanting to self-manage their employees’ workplace injuries can apply to join the ACC Partnership Programme. If they meet the programme’s eligibility criteria, employers operate as agents of ACC. In return, their employer levy is significantly reduced to reflect the level of risk undertaken by the employer. Workplace Safety Evaluations: A new injury prevention initiative called Workplace Safety Evaluations will be introduced in 2003/2004. It will enable ACC to increase an employers’ levy by 50 per cent where their workplace safety management practices are failing to protect employees from exposure to serious harm and injury. The increased levy will only be imposed if employers refuse to work with ACC to improve their practices, and is designed as a strong incentive for employers with poor safety records. Review of sub-industry risk groupings: Within the 550 industry classification units, there are currently 130 sub-industry risk groups. To inform the next levy round, ACC and the Department of Labour will review the levy setting principles, levy stability, industry groupings and number of risk groups.
SELF-EMPLOYED WORK ACCOUNT
Current Self-employed work account levy (average) $1.75
ACC recommended levy for 2003/2004 $1.75
Dept of Labour recommended levy for 2003/2004 $1.75 - $1.79
Approved levy for 2003/2004 (average) Per $100 liable earnings $1.79
The decision The Self-Employed Work Account levy will increase by 4 cents per $100 liable earnings for 2003/2004. This decision reflects volatility and recent increases in claim frequency, the need to build reserves in this account, and the fact that the account is new and has limited historical experience on which to draw.
The Residual Claims Account levy will decrease by 4c per $100 liable earnings for 2003/2004 (see Residual Claims Account).
The Earners’ Account levy for non work-related injuries) will remain at $1.20 per $100 liable earnings (see Earners’ Account).
The composite levy paid by self-employed people will remain at $3.30 per $100 liable earnings.
Background The Self-Employed Work Account levy meets the cost of all self-employed work injury claims from 1 July 1999. The standard level of cover (Cover Plus) for self-employed people is up to 80 per cent of the previous year’s liable earnings. The Cover Plus levy has two components: - an income benefit portion to fund weekly compensation; and - a non-income benefit portion to fund independence allowance, medical treatment costs, social rehabilitation, etc. The levies are averages only. Each business activity is given an industry classification. There are 550 industry classification units, more broadly grouped into 130 risk groups. A self-employed person’s actual levy may differ from the average, depending on their industry classification, and the risk rating and recent claims history of their risk group. Some self-employed persons’ levies may decrease. This will reflect a reduction in the number and/or cost of injuries in their risk group. Movement between groups may also occur where risk ratings are re-aligned.
Other self-employed levy initiatives ACC CoverPlus Extra gives self-employed people some flexibility of cover for personal injuries. Under this option, self-employed people can, with ACC’s agreement, nominate and agree to purchase the level of weekly compensation they wish to receive if they have an accident. This amount may be higher or lower than the standard weekly compensation. This option may suit those with fluctuating liable earnings (eg farmers or newly self-employed with no earnings record). CoverPlus Extra applies to both work-related injuries (under the Self-Employed Work Account) and non-work related injuries (under the Earners’ Account). The CoverPlus Extra pricing structure will be simplified for the 2003/2004 levies.
RESIDUAL CLAIMS ACCOUNT
Current levy (average) $0.35
ACC recommended levy $0.31
Dept of Labour recommended levy $0.31
Approved levy for 2003/2004 per $100 payroll/liable earnings $0.31
The decision The Residual Claims Account levy will decrease by 4 cents per $100 payroll/liable earnings.
Background Residual Claims levies are paid by employers and the self-employed to fund the cost of work injury claims before 1 July 1999, and non-work injuries to earners that occurred before 1 July 1992. In the past, ACC operated on a pay-as-you-go basis. As a result, ACC built up long-term liability for pre-1999 claims. The Residual Claims Levy funds the ongoing costs of these claims and, by 30 June 2014, will establish reserves to meet the cost of any remaining claims after that date. The Residual Claims Account is closed off for new claims. The levy is an average only. Each business activity is given an industry classification. There are 550 industry classification units, currently more broadly grouped into 123 risk groups.
Other residual claims levy initiatives Reduction in number of risk groups: The 550 classification units will be grouped into 41 risk groups in 2003/2004, down from 123 groups. This reduction will ensure that risk groups meet the minimum size required to maintain statistically credible levy assessments. As the Residual Claims Account runs down over time and existing claims are finalised, the number of risk groups will also need to decrease to maintain groups that are large enough to produce statistically credible levy rates.
Current levy (average) $1.20
ACC recommended levy $1.20
Dept of Labour recommended levy $1.20
Approved levy for 2003/2004 (average) per $100 liable earnings $1.20
The decision The Earners’ Account levy will remain at its current rate for 2003/2004. A small expected increase in the number and costs of injuries for this account can be absorbed within existing margins. Background The Earners’ Account covers non-work accidents to earners and the self-employed. The account is funded from earners’ levies paid through PAYE, plus self-employed levies based on earnings. Levy rates are required to be in a multiple of 10 cents on a GST inclusive basis to be incorporated in PAYE tables. In the 2002/03 financial year, the Earners’ Account levy was rounded up to $1.20 to achieve this requirement.
MOTOR VEHICLE ACOUNT
composite levy for all vehicles (includes licence fee levy
+ petrol excise duty) $169.67
ACC recommended composite levy $211.95
Dept of Labour recommended composite levy $211.95
Approved composite levy for 2003/2004 includes licence fee levy + petrol excise duty $211.95
vehicle class and description 2002/03Licence fee
levy 2003/04Licence fee levy
1. Ambulance, fire brigade vehicles, hearses, EB class vehicles, trailers, holders of trade plates for trailers/caravans Nil Nil
2. Petrol driven motor cars, self propelled caravans, mobile cranes, passenger service vehicles, motor vehicles not elsewhere classified, holders of trade plates for vehicles not elsewhere classified. $141.10 $141.10
3. Petrol driven mopeds, tractors, veteran motor vehicles, vintage motor vehicles, holders of trade plates for moped and/or motorcycles up to 60cc $49.39 $49.39
4. Petrol driven motorcycles, holders of trade plates for motorcycles 61cc and over $211.66 $211.66
5. Petrol driven goods van, truck, utility $141.10 $141.10
6. Non-petrol driven motor cars, self propelled caravans, mobile cranes, passenger service vehicles, motor vehicles not elsewhere classified. $166.10 $200.96
7. Non-petrol driven mopeds, tractors, veteran motor vehicles, vintage motor vehicles $58.14 $70.34
8. Non-petrol driven motorcycles $249.15 $271.52
9. Non-petrol driven goods van, truck, utility $176.10 $221.31
Current rate 2.3 cents per litre ($29.12 per year for average motorist)
Approved rate for 2003/2004 per litre 5.08 cents per litre ($70.73 per year for average motorist)
The decision From 1 July 2003, the average Motor Vehicle Account levy (vehicle licence fee + petrol excise duty) will increase by 25 per cent, from $169.67 to $211.95. This is primarily because of the increasing cost of rehabilitation and treatment services for people injured in motor vehicle crashes, and because ACC has improved its estimation of long-term rehabilitation costs for seriously injured claimants.
For standard petrol-driven vehicles, the increase will be funded by increasing the excise duty on petrol from 2.03c per litre to 5.08c per litre. For the average motorist, this represents an additional petrol cost of $41.61 a year. The increase has been allocated to the petrol duty (rather than the licence fee levy) because petrol usage reflects the amount of time spent on the road and is therefore the fairest indication of exposure to risk.
For petrol-driven motorcars, there will be no increase in the licence fee levy.
For petrol-driven motorcycles 61cc and over, there will be no increase in the licence fee levy.
For non-petrol driven vehicles, the motor vehicle levy increase will be funded through the licence fee levy.
Comparison with Australian rates: standard motor vehicle as
at July 2002
New Zealand ACC levy $NZ169.67
Average across all Australian states $A325 ($NZ355)
*New South Wales: third party only (covers third party injury, not vehicle damage) $A348 ($NZ380)
*Victoria: third party only: (covers third party injury, not vehicle damage) $A315 ($NZ344)
*Source: Deloitte Touche Tohmatsu
Background The Motor Vehicle Account levy is collected from two sources: a portion of the annual vehicle licence fee collected by the Land Transport Safety Authority and remitted to ACC; and an excise duty on petrol sales. The licence fee levy is divided into nine classification groups depending on the type of vehicle, usage and whether the vehicle is petrol or non-petrol powered. Certain vehicles, such as emergency vehicles, are exempt from the levy. Non-petrol powered vehicles pay an additional amount in their licence fee levy because they do not pay petrol excise duty. The Motor Vehicle Account has the highest proportion of seriously injured claimants. For this reason, increased costs of treatment and rehabilitation affect this account more than ACC’s other accounts.
Other motor vehicle levy initiatives Trade plates: Certain groups (eg vehicle dealers, car wreckers, government departments) can apply for trade plates for an unregistered vehicle so that it may be used on the road under certain limited conditions. The licence fee levy for all trade plates is currently the same as the motorcycle levy. To simplify the administration of the levy, and make it fairer for trade plate holders, the four types of trade plates will be allocated to the classifications that match the vehicle type covered.
Petrol excise duty refund: Some vehicles (eg those that are not used on the road) are exempt from the motor vehicle levy. The process for claiming back petrol excise duty paid through petrol purchases is being reviewed, in order to make it easier to apply for the refund.