Hon Dr Nick Smith
Minister for ACC

10 March 2009 Media Release

ACC motor vehicle levy to increase by $32

ACC Minister Nick Smith today announced a $32 increase in the motor vehicle levy from 1 July 2009.

The motor vehicle license fee for a petrol car will increase from $136.44 to $168.46 and the ACC petrol levy will rise from 9.34 cents per litre to 9.90 cents per litre.

“This $32 increase comes at a tough time for motor vehicle owners, families and businesses and is on top of a $50 increase last year, “Dr Smith says. “It is the bare minimum needed to fund the cost of motor vehicle accidents while maintaining an acceptable level of solvency in the account. An increase of $121 to $376.48 is what officials had advised would be required to fully fund the Motor Vehicle Account based on the latest report liabilities, the existing law, and funding policy.

“The motor vehicle levy rate largely reflects an increase in the cost of treating and rehabilitating the seriously injured – especially home support.

“While the Government is committed to helping the injured, ongoing large increases in ACC are not affordable. That is why the Government is embarking on a programme of ACC reforms to contain costs, push out the full funding date, and achieve greater flexibility in funding mechanisms for the Motor Vehicle Account.

“I am confident with the changes the new Government is making in ACC that such large increases will not be repeated again next year.”

ENDS

Questions and Answers

Q - What is the Motor Vehicle Account?

A - This account is used to meet the costs of entitlements for motor vehicle injuries (that is, personal injuries suffered because of the movement of a motor vehicle, except for personal injuries suffered because of off-road use of a motor vehicle and certain work-related personal injuries). This Account has a residual (pre-1999) component.

Q - Why do ACC levy rates need to change?

A - There are a number of factors that affect levy rates. These include the forecast trends in injury rates, the duration and cost of claimants' rehabilitation or compensation, and economic factors such as inflation and interest rates. Rising interest rates increase the future earnings expected from ACC's investments and decrease ACC's liability for past injuries and, as a result, reduce the levy rates. The opposite is true when interest rates reduce.

Q - How do the new rates compare with the 2008/09 rates?

2008/09 - 2009/10 - Increase

Petrol levy (cents per litre) - 9.34¢ - 9.90¢ - 0.56¢

Average annual licence fee - $136.48 - $168.45 - $31.97

Total average per vehicle - $254.63 - $287.00 - $32.37

Q - Why do diesel* vehicles pay more than petrol?
* includes other non-petrol powered vehicles

A - Motor vehicle account levies are collected via an annual licence fee for vehicles and a tax on petrol sales.
For petrol powered vehicles the rates for 2009/10 are:

• Average annual license fee of $168.45 (paid when you register your vehicle)

• Petrol tax of 9.90 cents per litre (for the average vehicle this works out as $118.55 per year).
Total levy payable: $287.00

Diesel vehicles don’t pay the petrol tax, so the whole of their levy is collected from the annual license fee (i.e. $287.00).

Q - How can ACC charge a different levy for different vehicles when ACC is a no-fault scheme?

A - A no-fault scheme means that everyone receives cover as specified in the Injury Prevention, Rehabilitation and Compensation Act 2001, regardless of whom or what 'caused' an injury.

Levies are charged differently in line with the level of risk that a particular group bears (as determined by injury involvement). In the case of work injuries, the 'group' an employer is in depends on the industry; while on the road, the ‘group’ a motorist is in depends on the type of vehicle and its use.

It is the cost of claims in the ‘group’ which is the basis of the levy for the group, not who is at fault or causes the accident.

Q - If I own two cars why do I have pay two ACC levies?

A - Currently levies are set according to the type of motor vehicle you own. This means that ACC collect a levy for each motor vehicle that requires licensing.

Charging the levy by vehicle type rather than driver keeps the levies down for all levy payers. There would be significant operational costs if ACC were to come up with an individual rating system and/or collect the levies directly from each motorist.

The levy you pay also provides cover to:

Other people in your household or friends who might drive your vehicle

Passengers in your vehicle and,

Other road users in the unfortunate event of a road crash.
If you were a passenger in someone else’s vehicle and were injured in a road crash, then the levy for that vehicle will provide you with cover.

ENDS

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