ACC LEVIES AND RELATED POLICY 2010/11
Executive summary
3. New levy rates are required to be set in regulation by 31 March 2010 for the composite work levy and composite Earners' Account levy rates otherwise the 2009/10 levy rates will remain in place, and ACC would be significantly underfunded. The Inland Revenue Department requires notification of the new earners' levy rates by 17 December 2009. The New Zealand Transport Agency (NZTA) and New Zealand Customs Services (Customs) also require any changes in classifications in the Motor Vehicle Account (for example, for motorcycles) prior to the new year.
4. The table below outlines the liability and unfunded liability across the Accounts between 2008 and 2009:
2009 Liability ($m) |
2009 Unfunded Liability($m) |
Percentage funded | |
|---|---|---|---|
| Composite work | $5,868 | $2,123 | 64% |
| Motor Vehicle Account | $6,845 | $4,186 | 39% |
| Earners' Account | $4,660 | $1,950 | 58% |
| Treatment Injury Account* | $2,167 | $1,409 | 35% |
| Total | $23,785 | $12,761 | 46% |
* The Treatment Injury Account is funded from both the Earners' Account and the Non-Earners' Account depending on the earner status of the claimant
5. ACC's unfunded liabilities have grown significantly from $4.2 billion to $12.7 billion over the past four years as a consequence of levies being insufficient to meet the growth in liabilities. The Motor Vehicle and Earners' Accounts have the lowest levels of solvency of the levied Accounts.
6. I have introduced the Injury Prevention, Rehabilitation, and Compensation Amendment Bill, which pushes out the date for fully funding residual claims from 2014 to 2019. The change in the fully funding date will make a substantial difference to the path to full funding in the composite Motor Vehicle and Work Accounts, but not in the Earners' Account. The path to full funding affects levy rates. The Bill is a remedial measure, which, if enacted in February (before the levy regulations for the 2010-11 levy year are made), will provide further reassurance that my recommended levy rates are sustainable.
7. The table below provides a summary of the current 2009/10 rates, ACC's consultation rate for 2010/11, information included in ACC's consultation documents about likely rates should the IPRC Amendment Bill be passed, ACC's recommended rate, ACC and the Department's proposed rate, the minimum rate required to avoid a deterioration in solvency and my proposed rates:
Composite average work levy[2] Average levy per $100 of liable earnings [3] |
Composite Earners' Account levy[4] Levy per $100 of liable earnings |
Composite Average Motor Vehicle Account levy[5] average levy per vehicle |
|
|---|---|---|---|
| Current Rate (2009/10) | $1.31 | $1.70 | $287.00 |
| ACC public consultation rate for 2010/11 | $1.89 | $2.80 | $417.28 |
| Reduced rate[6] from information in consultation documents | $1.47 | $2.45 | $317.00 |
| ACC recommended rate | $1.89 | $2.80 | $394.95 |
| ACC/DoL proposal | $1.57 | $2.70 | $352.19 |
| Minimum to avoid solvency deterioration | $1.47 | $2.40 | $291.96 |
| Minister for ACC's proposal | $1.47 | $2.50 | $334.52 |
| Registration | Current 09/10 | Consultation rate | ACC proposal | DoL proposal | Minister's proposal |
|---|---|---|---|---|---|
| Petrol car | $168.46 | $272.72 | $211.79 | $213.08 | $198.46 |
| Petrol Moped | $58.97 | $257.58 | $211.87 | $209.53 | $129.24 |
| Petrol motorcycles up to 600cc | $252.69 | $511.43* | $426.13 | $355.14 | $327.70 |
| Petrol motorcycles 601cc and over | $252.69 | $745.77 | $623.91 | $537.14 | $426.92 |
| Petrol goods service vehicles | $168.46 | $291.91 | $218.8 | $220.35 | $238.15 |
| Non-petrol car | $279.09 | $390.56 | $329.63 | $331.84 | $311.38 |
| Non-petrol goods service vehicles (mostly trucks) | $302.32 | $585.84 | $494.45 | $497.76 | $467.08 |
* ACC consulted on including under 125cc with mopeds. This is the rate for 125cc to 600cc.
8. I also propose a number of policy changes:
- changes to motor vehicle relativities for motorcycles and heavy vehicles;
- dividing the motorcycle classification by engine size up to 600cc and 601cc and over;
- reclassifying the moped subclass;
- removing the current exemption for hearses by reclassifying;
- allowing motor spirit levy to be collected on all motor spirits as currently defined under the Customs and Excise Act 1996[7] (this is a change to realign the Motor Vehicle Account Regulations with the Customs and Excise Act following definitional changes in the Customs and Excise Act last year);
- increasing the maximum liable earnings entry criteria for the Workplace Safety Discount Programme;
- changes to two classification units in the Work Account to provide a suitable classification for existing levy payers that do not fit well within the current definitions
- increases to maximum and minimum liable earnings.
9. These changes will be implemented in the relevant levies regulations for 2010/11.
[1] Levy rates quoted are GST exclusive for the Work and Motor Vehicle Accounts unless indicated otherwise, and GST inclusive for the Earners’ Account. The rate shown for the Earners’ Account composite levy is the rate that earners will see coming out of their pay.
[2] Including (1) the levy or portion of a levy payable to fund the Work Account to achieve the purpose of fully funding all entitlements provided under the Act by the Corporation to employees, private domestic workers, and self-employed persons for work-related personal injuries, other than as described in (2); and (2) the levy or portion of a levy payable for the purpose of fully funding the total value of the outstanding claims liability for the Residual Claims Account as at 30 June 1999 as recognised by the Corporation.
[3] Including Workplace Safety Management Practices (WSMP) loading.
[4] Including (1) the levy or portion of a levy payable to achieve the purpose of fully funding the outstanding claims liability of the Composite Earners’ Account as at 30 June 1999 as recognised by the Corporation and; (2) the levy or portion of a levy payable under section 219 to fund the Earners’ Account to achieve the purpose of fully funding the cost of all other claims under the Earners’ Account.
[5] Including (1) levy or portion of a levy payable to achieve the purpose of fully funding the outstanding claims liability of the Motor Vehicle Account as at 30 June 1999 as recognised by the Corporation; and (2) the levy or portion of a levy payable to fund the Motor Vehicle Account to achieve the purpose of funding the costs of all other claims under the Account.
[6] This rate is from information included in ACC's consultation documents that was based on possible changes to management practices, regulations and legislation.
[7] This proposal will be subject to any necessary modifications resulting from the Border (Customs, Excise, and Tariff) Processing Bill if that Bill is enacted before the beginning of the 2010-11 levy year.