How ACC works when you are self-employed
Everyone in New Zealand is covered by ACC for personal injury. The difference for self-employed people is in how you pay and how you get paid if something happens.
Employees have the earner's levy deducted through PAYE and never think about it. As a sole trader, ACC invoices you directly, usually around September, once IRD has passed on the earnings you declared in your IR3. Your first invoice can therefore arrive a long time after you started trading, and it may cover more than one period. Budget for it.
Because ACC bills in arrears based on declared income, new sole traders are frequently surprised by the size and timing of their first levy invoice. Set money aside for it in the same account you use for income tax.
CoverPlus vs CoverPlus Extra
| CoverPlus | CoverPlus Extra | |
|---|---|---|
| How you get it | Automatic: the default | You apply for it |
| What you are paid | A percentage of your income, based on your most recently completed financial year | The fixed amount you agreed in advance |
| Levies | Based on your actual declared income | Based on the cover level you chose, predictable |
| Suits | Steady, well-documented income | Variable income, new businesses, or anyone who wants certainty |
CoverPlus Extra is worth a serious look if your income moves around a lot, or if you have just started and your last completed year does not reflect what you now earn. Under standard CoverPlus, a low prior year means a low payout, which is exactly the wrong outcome for someone whose business has just taken off.
Get your classification unit right
Your levy rate depends on your classification unit, the code describing the work you actually do. Rates vary enormously between low-risk office work and high-risk physical trades, and that is entirely reasonable.
What is not reasonable is paying a roofer's rate because the code was set carelessly when you registered. Check what you are classified as, make sure it reflects your actual day-to-day work, and update it if your work changes. This one check has saved sole traders thousands.
What ACC does not cover
ACC covers injury. It does not cover illness. If you have a heart attack, get cancer, or are laid up with a serious illness, ACC pays nothing.
For a sole trader this is a significant gap, because there is no sick leave and no colleague to cover the work. The business income simply stops. Options to fill the gap:
- Income protection insurance: pays a monthly benefit if illness or injury stops you working. Usually the most important cover a sole trader can hold.
- Trauma or critical illness cover: a lump sum on diagnosis of specified conditions.
- Health insurance: gets you treated and back to work faster.
- Life insurance: if people depend on your income.
Business insurance worth considering
| Cover | What it does | Who needs it |
|---|---|---|
| Public liability | Damage or injury you cause to other people or their property | Anyone working on client sites or dealing with the public |
| Professional indemnity | Claims that your advice or professional work caused financial loss | Consultants, designers, accountants, engineers, IT |
| Tools and equipment | Theft or damage to the gear you earn with | Trades and anyone with a van full of tools |
| Business interruption | Lost income when something stops you trading | Businesses with premises or stock |
| Vehicle | Personal policies often exclude business use | Anyone using a vehicle for work: check your policy wording |
| Cyber | Breaches, ransomware and the cost of dealing with them | Anyone holding customer data |
A standard personal car policy may not cover you while using the vehicle for business. If you are carting tools and driving to jobs on a personal policy, you may be uninsured at exactly the moment it matters. A phone call to your insurer settles it.
Insurance premiums for genuine business cover are generally deductible. See the expenses guide.