Have you heard of ACC Cover Plus Extra? Probably not, because ACC is a boring topic, nobody wants to talk about it at a Sunday barbeque while you are holding that ice cold beer and indulging yourself to that smoky goodness of freshly grilled meat which is fair enough since ACC is a very intricate topic which you may need some specialist advice. If you are a workaholic like most business owners, you may not even bother discussing it. Well, my friend let me tell you an honest truth, you are missing a lot, bigtime!
You are missing the opportunity to save a huge amount of money on your ACC levies every year. By default, you might be covered under the ACC Workplace Cover or ACC Plus Cover which your levies will be based on the classification unit levy rate and last year’s liable earnings you submitted to the companies office & IRD. As you earn more your ACC levies will be higher. But did you know that you can actually pay just for the minimum cover set by ACC? You heard it right, you have the ability to only pay for based on $25,376 (2017/18 year) meaning that if you are taking drawings of $200,000 a year you will not need to pay levies for the remaining $98,677(based on maximum $124,053).
Now you’re thinking, how is it possible?…
Introducing ACC Cover Plus Extra
The ACC cover for self-employed who are craving for the freedom from ACC levies’ jail. ACC Cover Plus Extra allows you to choose how much of your income you want covered if you’ve had an accident and can’t work. ACC will pay you 100% of your chosen amount as weekly payments, until you’re able to get back to work. It is an agreed value contract which means that you will have more security that you will get the $25,376 less tax (for year 2017/18) a year on your ACC claim.
You might be wondering, why this hasn’t been an option presented to you initially by your accountant when you are setting up your ACC account? Let me give you a short history of where ACC Cover Plus Extra started. It is initially intended for farmers. If you are a farmer you will understand that not every year is a good year in terms of business income. There might be years that you are earning hundreds of thousands of dollars but more often than not, the business is technically declaring a loss. The usual ACC products, ACC Workplace Cover or ACC Cover Plus, will cover you as much as 80% of your last year’s income which would mean that if your last year’s liable earnings were $0 then you would receive no weekly compensation from ACC. ACC thought of a way where they can protect farmers better, that if they are in a bad year last year they will still be covered with the amount that the farmers think is enough for them to survive if they are unable to work due to an accident.
One with a brilliant mind said, ‘’If farmers are lucky enough to have this ACC Cover Plus Extra why don’t we spread the blessings and share it with other business owners who will benefit from this?’’ This gave birth to the numerous ACC specialists and financial risk advisers who are providing the best advice on how to structure your ACC position making sure that you will maximise your ACC savings while having a top notch income protection cover in the event that you got disabled. There are certain risks and dangers that can be catastrophic though if not actioned correctly with the right structures in place to mitigate these risks, this is where a specialist ACC and financial risk advisory like JD Life can help out.
ACC determines levy rates based on how much manual labour is involved in your business operations which often have more higher claims experience by participants. The more risk and claims, e.g. house building, farming, tree logging, etc., the higher your levy rate will be. If you are only doing office jobs, e.g. office administration, accountancy, consulting services etc.., you will have lower levy rate since you are not doing risky tasks and have a lower chance to have an accident from a work related accident.
If you are one of those who are doing manual works, ACC Cover Plus Extra is for you. Since you are paying the higher levy rate, the more income you get the higher ACC levies you need to pay. But if you are with ACC Cover Plus Extra, you can have ACC to stop charging you levies on your income more than the minimum liable amount for self-employed Directors and Shareholders.
How much you can save on ACC Cover Plus Extra?
Let’s go back to our example earlier, assume you are a builder, you decided to take $200,000 of drawings last year, if you instead take the minimum under ACC Cover Plus Extra, you can take home savings of $3500 EVERY YEAR.
Let’s take the saving ability to the next level. So you got your wife taking care of the paper works for the business. She is not doing any manual work nor visiting the work site. You have her as one of the shareholders of the company. By default she will be paying ACC levies under the business high levy rate such as a builder rate instead of the true risk that she represents to ACC which is of an admin staff, so the business is significantly overpaying. Well, this shouldn’t be the case should it? Hardly seems fair. With ACC Cover Plus Extra you can have her change her classification unit code to a lower levy rate for administrative office workers. Plus you can also have her to only pay levies based on the minimum liable earning. Sounds exciting right? It is like punching ACC left and right until it gives you the maximum savings.
The Ugly of ACC Cover Plus Extra…
Now we have presented to you the beauty of having ACC Cover Plus Extra and for the sake of fairness and equality, we’ll present to you the not so good side of it as well. Reducing your ACC levies and cover means that you are also reducing your benefit amount that your family will receive in the event that you got disabled or died due to an accident, called fatal entitlements. Also, bare in mind that ACC Cover Plus Extra only covers accident-related disablement and death, so if you got disabled or died due to an illness you will not get any claim from ACC. Statistics shows generally that more people are off work for illness than accident.
This is the time that your financial risk adviser joins the party such as JD Life. With the cheaper or same dollar value of your ACC levies savings, they can offer you a better income protection benefit which will protect you from illness and accidents and cover the shortfall of the fatal entitlements taken away.
In an event of an accident disablement, there are some Income Protection products in the market that can run concurrently with your ACC Cover Plus Extra, which means that you can claim from the insurance provider and ACC at the same time. These products help you maximise your benefit amount and so you will not need to worry about your financial position while you are unable to work. All you have to do is sit back, relax and focus on your recovery.
In the event of an accidental death, your financial risk advisory such as JD Life, will need to calculate the fatal entitlements left to your family that will be put at risk when you transfer to ACC Cover Plus Extra. This amount can be covered by a better Life Cover insurance product with no further cost to you and it will allow your family to get a lump sum amount not only in the event of an accidental death but also in the event that you pass away due to natural circumstances such as a heart attack or cancer.
One last thing on ACC Cover Plus Extra
If you read this far, it is an indication that you are interested to know more about ACC Cover Plus Extra. A piece of advice, your ACC specialist and financial risk adviser are the best persons to get in contact to make sure that you are not putting anything at risk while doing the transfer to ACC Cover Plus Extra. Personally, I still believe that ACC Cover Plus Extra is definitely the best way to go.
Till next time. Cheers.
Talk to us today to find out more and get started on your way to savings and better cover, JD Life.
Jaz Dosanjh