ENSURING FINANCIAL SECURITY WHEN INJURY STRIKES
Some small business owners and self-employed people may not appreciate the financial impact a personal injury can have on their business, especially if they have to take time off work to recover. But, if the worst happens, a range of assistance is available.
ACC provides comprehensive, 24/7 personal injury cover on a no-fault basis for everyone in New Zealand. This means that if you are injured at home, on the road or at work, you are eligible for ACC cover.
All business owners are legally required to provide ACC cover for work related injuries. Businesses with employees are covered by ACC Workplace Cover. This provides personal injury cover for business owners and their employees, so if the business owner or a staff member is injured at work and needs time off, they are eligible to receive medical treatment, rehabilitation and weekly compensation of up to 80% of their regular income.
But what about self-employed people?
All self-employed people are automatically covered by ACC CoverPlus. Under CoverPlus, weekly compensation is based on a person's earnings during the previous year, and they can be eligible for weekly compensation of up to 80% of those declared earnings. This however could be reduced if the business continues to generate income.
But what if a person's income varies from year to year? Or if they haven't been self-employed for very long? For these people, there is another option - CoverPlus Extra. This product gives self-employed people the ability to negotiate an amount of personal injury lost earnings cover to the level they and their family require.
If someone with CoverPlus Extra is injured, they already know how much they are entitled to without having to prove their last year's earnings. The individual will receive l00 per cent of the agreed weekly compensation, right up to the point when they are deemed fully fit, and this stays the same should the business continue to generate income. Here's an example of how CoverPlus Extra might work for a self-employed person:
Sally runs a consulting business. She expects to earn about $55,000, which is crucial
to supporting her family and making mortgage payments. However, because Sally started her business last year she only earned $40,000 last year. Because Sally's income was lower last year, if she sustained an injury that prevented her from working she would be entitled to a maximum of about $615 a week (before tax) under CoverPlus. This would be significantly lower than the $850 a week she would have expected to earn. But if Sally had CoverPlus Extra, she could negotiate the level of compensation required to support her family and pay the mortgage.
On the flip side, CoverPlus Extra also allows self-employed people to reduce their levies by negotiating a weekly compensation rate lower than their anticipated income. An example might be a dairy farmer who had very high earnings (over $100,000) last year, and wishes to negotiate cover at a more suitable level of $65,000.
What is the difference between ACC and Income Protection Insurance?
ACC provides financial assistance in the event of an injury, and also assists with medical treatment and rehabilitation, to help get people back to work, and earning regular income as quickly as possible.
By contrast Income Protection Insurance covers a person for illness or other events which ACC does not cover. Under some income protection insurance policies the insurer may top up ACC compensation to a pre-arranged percentage of the person’s income. We encourage clients to have Income Protection Insurance, as it provides the peace of mind to know that financially they will be covered should they become unable to work for a reason not covered by ACC.
ACC combined with Income Protection Insurance, ensures best overall cover. We suggest that you talk to your insurance advisor about the best mix of cover to suit your individual needs.
How are ACC levies calculated?
For the self employed, all ACC levies are calculated using the individual's "liable" income -which is basically their total income minus expenses. Due to the different risks associated with various types of work. ACC levy rates vary according to the industry the business operates in. If you choose CoverPlus Extra, your ACC levies also take into account the amount of compensation agreed with you - ie the difference between your normal entitlement rate and your chosen weekly compensation payment.
If you would like to know more about how ACC CoverPlus and CoverPlus Extra affects you, or how your levies are calculated please contact us.
TAX TIP
If you are travelling overseas it is likely a portion of your travel costs are tax deductible as a business expense. Talk to us about how to qualify before you depart.
