ACC Minister Judith Collins made the announcement that ACC levies will reduce for employers from $1.15 to $0.95 – a decrease of 17% - and for employees it will fall 15% from $1.48 to $1.26.
“The average New Zealand household can expect to keep just over $200 each year. Small businesses will also be around $180 better off annually and larger employers will receive, on average, a $6,000 reduction,” Collins stated.
Collins explained that the cuts largely reflect the Earners Account (paid by workers) and the Work Account (paid by employers) being fully funded.
Motor Vehicle Account levies, incorporated into car registration and petrol prices, however will not be reduced and will stay the same due to the account not being fully funded. The Government expects to introduce cuts for motor vehicle owners from 1 July 2015.
John McGill, CEO of remuneration and performance consultancy Strategic Pay, told HRM Online
while the extra money in the pay packets would be welcome, overall it is a small sum and if household costs are to rise it won’t go far.
“The $200 the average household would receive would be most welcome, but it does only amount to $17 a month so it’s not a huge amount of money,” he explained.
“No one’s going to complain about receiving a bit more money because of reduced ACC levies [but] $17 a month is not a lot and there’s potentially some big hits next year in the pipeline for average households.”
Of particular concern would be rises to mortgage rates, McGill explains.
“While $17 a month is great, even a one per cent increase in interest rates is something like $116 after tax that people are going to have to find. If you get the two per cent movement in interest rates, which a number of commentators are predicting, on a $200,000 that’s $200 plus,” he said.
McGill expects when those rates rise wage pressures will “appear quite dramatically”.
He added while large employers would welcome the change, likewise for them it is not a substantial amount and that it would not make a huge difference to them.
The new rates will be in place for the levy year which starts 1 April, 2014. Collins added the Government is on track for further levy cuts in 2015/16.
For more information on the levy changes click here
Employers and workers can expect to keep more pay in their pockets to the tune of $387 million combined when ACC levies are cut in 2014/15.