Does This Increase Affect Your Tax Refund?
Come April 1st, your ACC earner's levy rate is now $1.39 for every $100 of your liable earnings, a slight increase from $1.21. Before we get to the nitty-gritty of whether this will affect your tax refunds and tax returns or not, let's understand the change and reasons, else just skip to the bottom of this page!
What are ‘liable earnings’?
This is the income from which you pay for your ACC. For employees, liable earnings are your wages or salaries paid in a financial year where your employer deducts a certain percentage of your wages (similar to your tax). You should be able to see this on your payslip. For the self-employed, liable earnings is the income earned in a financial year as declared on the end-of-year tax return. You should be getting your invoice from ACC.
The ACC maximum earnings on which an employer is charged has also been increased to NZ$ 124,053. IRD collects these on behalf of ACC.
But why has the levy been increased?
In plain words, this is largely because New Zealand’s population has increased and the economy is steadily improving; meaning, there are more people employed or self-employed and may need ACC’s support.
In fact, based on the data they collected in 2015, about 60% of all new claims were in the home and community, $474m was the cost it took to cover sports and recreation injuries, 48%of injuries at home and out and about were related to falls and more.
What ACC learned from this, is that there have been more claims than expected, more expenditure is required on medical costs, improved treatment is a necessity, and, of course, proper rehabilitation services - all of which costs more money, like everything else.
What does it cover?
Good news, ACC can pay you up to 80% of your income as weekly compensation if you can’t work because of an injury - this is called ‘weekly compensation’ - the most recognised use of your levies.
It also funds medical treatment, health professionals, support providers, ambulance use, doctor’s visits, physical rehabilitation, surgery, home modifications (such as ramps, handrails, chairlifts), childcare, and a lot more.
How can Your Refund Limited help?
We have our partner’s PAYE calculator to calculate the amount of cash you take home, minus the ACC and/or Kiwisaver you may have, and of course, the tax rate at the percentage you have been paying. Based on that amount, you can check in with us to find out if you are owed any tax refunds and tax returns or not.
Will this affect my tax refunds?
Tax refunds is cash the Government owes you and is separate from your ACC. So the straight answer is, no, it will not effect your taxes at all!! Tax returns and refunds are taxes you have been paying all these years with no knowledge of whether you have overpaid them or not. This is in fact quite common if your employer made a mistake while calculating PAYE and ended up paying more for taxes instead.
IRD will not alert you right away and tell you that you paid too much. You have to go after them, or, in this case, we can do it on your behalf.