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ACC makes 2005/06 levy recommendations

21 October, 2004

ACC makes 2005/06 levy recommendations

ACC's Board has recommended levy rates for the 2005/06 year. The recommendations to the Minister for ACC are not binding on the Government, which will obtain further independent advice before announcing the final rates in December.

The average recommended rates for the Employers' Account and the Earners' Account (which covers non-work injuries) remain unchanged on last year.

Despite ACC's strong operational performance and investment returns over the last year, less favourable interest rates since August have increased pressure for upward movement in Self-Employed and Motor Vehicle levy rates.

As ACC fully funds injuries in the year they occur, the estimate of future cost is sensitive to interest rate movements.

Since August, long-term interest rates used to calculate the ACC's long-term liability have declined from 6.5 percent to 6.2 percent.

As interest rates fall, ACC's forecast of future investment earnings must reduce, requiring that more money be put aside now to meet the current and future costs of injuries that happen during the levy year.

In the Self-Employed Account, which accounts for less than 4 percent of all levies collected by ACC, an average rise of 3.9 percent is recommended.

Self-employed rates had been under pressure already because declining aggregate earnings for self-employed people have resulted in a fall in levy income to ACC, even as injury costs have remained constant.

ACC is also recommending a 4.8 percent increase in the Motor Vehicle levy to $206.93. This levy reduced in the current year and the recommended levy for next year is still below last year's $211.96. In keeping with consultation feedback, it is recommended that the bulk of the increase for petrol powered vehicles be achieved through a rise in petrol levy from 5.08 to 5.77 cents per litre. This more closely aligns the cost of injuries to vehicle usage.

Because motorcycle petrol consumption is lower than that of cars, it is recommended the ACC component of the annual motorcycle licensing fee increase by 5 percent while the licensing fee for all other vehicle types be maintained at current rates.

ACC Board levy recommendations for 2005/06 (GST exclusive)
Who pays Levy component Current 2004/05 average Recommended 2005/06 average Recommended change
Employers * Composite Levy (for every $100 of payroll) $1.21 $1.21 No change
Which consists of a:
Work levy $0.91 $0.88
Pre-1999 claims levy $0.30 $0.33
Self-employed people * Composite Levy (for every $100 of earnings) $3.10 $3.22 +3.9%
Which consists of a:
Work levy $1.73 $1.82
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 $206.93 +4.8%
* Note: These are average rates. Individual rates for industry groups may increase or decrease based on recent experience.

ACC also recommended: The 129 levy risk groups (or pricing pools) for the employer and self-employed work levies and the 41 risk groups for the pre-1999 claims levy be maintained. A small number of classifications be moved, or their descriptions amended, to match changing market conditions and clarify coverage.

Individual rates will be finalised and incorporated into draft Levy Regulations once the Government has set the average rates.

There may be some other modifications to rates as a consequence of legislation currently before Parliament.

ENDS

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