The Government is predicting New Zealand businesses will to save about $100 million over the next two years, following the reduction of the ACC Work Levy.
The decision has been jointly made by Prime Minister Jacinda Ardern and ACC Minister Iain Lees-Galloway, who have also decided to hold all other ACC levies at their current rate.
“The Government is determined to ensure Kiwis aren’t being charged more without reasonable cause, while lifting wages for New Zealanders,” says Jacinda.
“When the rises in ACC levies was first discussed the Government took a clear position that a compelling case would need to be presented in order for us to agree to levy increases, and that Cabinet would consider the wider public interest.
“We have done just that and concluded that the levies would not increase, and actually decrease for work levies paid by employers and self-employed people. This will save New Zealand businesses and their customers around $100 million over the next two years compared to current rates.
“We have been guided by advice from MBIE and Treasury in reaching this decision. Treasury advised that they support the proposed reduction in the Work levy and maintaining the current Earners’ and Motor Vehicle average levy rates, due to the high solvency levels of the accounts, and because they consider the assumptions to be conservative for a statutory scheme.
“This Government is committed to keeping ACC levies fair for businesses, workers and motorists, and no higher than needed to meet the real costs of injury claims.
Key aspects of the ACC levies for 2019/20 and 2020/21 include:
• The average Work levies paid by employers and self-employed people will decrease from 72 cents to 67 cents per $100 of liable earnings,
• The Earners levies paid through PAYE (or invoiced directly through ACC for self-employed people) will remain at its current level of $1.21 per $100 of liable earnings
• The average Motor Vehicle levies, which include the annual license levy and petrol levy, will remain at $113.94.
Minister for ACC Iain Lees-Galloway says alongside the reduction in Work levies paid by employers and self-employed, the motorists and earners levies would remain the same for the next two years.
The ACC Vehicle Risk Rating programme would also end.
“ACC made recommendations in line with the Funding Policy Statement gazetted by the previous Government. I carefully considered the advice on ACC’s assets and accounts. The Government needs to consider the wider public interest and these rates strike the right balance, fully-funding ACC accounts without increasing the burden on New Zealanders,” says Iain Lees-Galloway.
“The VRR programme, which applies different levy rates to different makes and models of cars based on their safety ratings, is challenging for MBIE to administer and lacks evidence that it is contributing to a safer vehicle fleet in New Zealand.
“There is no evidence that variable levies based on VRR contribute to injury prevention or encourage the purchase of cars with higher safety ratings.
“It also loads more of the burden onto low-income people and families, as they are generally less able to buy cars with the best safety ratings.
“The Government has made road safety a priority in the transport budget, investing $4.3 billion over three years in programmes and projects aimed at saving lives on the road. This is a $1.2 billion increase over the previous three years,” says Iain.
It’s a decision the NZ Automobile Association is disappointed by.
“Scrapping Vehicle Risk Rating is a backward step at a time when a rising road toll is demanding more actions to improve road safety,” says AA principal regulations advisor Mark Stockdale.
“Improving the safety of the vehicle fleet is acknowledged as a key action to improve New Zealand’s road safety, and much more needs to be done to promote vehicle safety to Kiwis.
“This is why the AA wants the Government to mandate the display of safety ratings at the point of sale – something the Vehicle Risk Ratings could have been used for.
“While Vehicle Risk Rating has only been in place for a few years, it has helped raise public awareness about vehicle safety and was a way to incentivise New Zealanders to make safer choices when purchasing cars.
“Vehicle Risk Rating helps to educate motorists that at any given budget, not all cars are equal in safety. Some old cars worth just a few thousand dollars are rated Band 3 or 4, while some late-model cars rate poorly.
“The annual licence renewal serves as a reminder of the safety rating and may promote thinking about relative safety ratings. In the long run the AA believes Vehicle Risk Rating will help change the purchase behaviour of New Zealanders, and in turn influence the safety standard of vehicles imported and sold by car dealers.”
The AA also says that, whilst it has been claimed that ACC levies are not increasing for New Zealanders, this is not true for motor vehicle levies.
As a result of scrapping Vehicle Risk Rating, the annual motor vehicle levy for 65 per cent of car owners will increase. Levies for 38 per cent of cars currently in the safest band will rise $28 – more than double the ACC levy they currently pay.
The new Work and Earners’ levies will come into effect on 1 April 2019. The vehicle risk rating will no longer apply from 1 July 2019 with the Motor Vehicle rates coming into effect on the same date.