Govt announces more cash in hand for workers, business

People will find more money in their pay packet and motorists will next year pay around a third of the ACC levy they do now, under changes announced by the Government.

However, the full extent of savings will not be felt for two years, with ACC levy cuts of around $500 million coming in over 2016/17 and 2017/18.

Employees pay levies through their PAYE, according to how much they earn.

They, along with businesses and motor vehicle owners, would have more money in the pocket when levies were cut, ACC Minister Nikki Kaye said.

Someone on a salary of about $50,000 currently has an earners' levy of about $747 taken from their pay each year. This will drop to about $711 in 2017.

If they also own a car, total levy savings could be about $250.

A business earning about $1 million a year currently pays about $10,000 in levies. That could drop to about $8000 in two years' time.

Ms Kaye said the latest cuts - based on financial projections and therefore only indicative - would take total levy cuts since 2012 to about $2 billion.

"As an example, this year the average ACC motor vehicle levy ... would fall from around $330 to $195 a year.

"On current projections, this is likely to fall further to around $120 next year, making the average motor vehicle levy around one third of what it is right now."

National has moved on the issue after charges by Labour that ACC was being used to generate money to try to reach surplus, and the corporation's chair saying it was likely in the best financial shape in its history.

Last year, the Government rejected a recommendation from ACC that levies for the 2015/16 year be cut by 21 per cent for the work levy on employers, and by 5 per cent for the earners' levy on workers.

Instead the work levy was cut by 5 per cent, and the earners' levy remained the same.

Labour leader Andrew Little said yesterday's announcement showed the Government had buckled to pressure, but $500 million over two years was not enough.

"In March, Labour revealed New Zealanders were being overcharged $350 million per year in the work and earners accounts. Today the Government has announced $375 million in cuts next year, but this includes motor vehicle levies."

Ms Kaye has also announced legislation that would put in place a new framework to set ACC levies, taking effect in 2016/17 and giving the Government involvement from the start of the process.

Ms Kaye denied it was done to avoid the political embarrassment of the Government not cutting levies as much as ACC recommended, but rather was to enable better long-term planning.

"Currently, we end up making those levy decisions. All we are doing is saying at the outset what the rules of the game are."

What are ACC levies?

Levies are paid by businesses, motor vehicle owners and employees for injury cover that is funded by ACC.

Why are levies coming down?

ACC is in excellent financial health - probably the best it has been. Its investments, close to $31 billion, have performed better than expected.

Who decides how levies are set?

ACC makes a recommendation to the Government, which then has the final say. Last year, the Government reduced levies by less than had been recommended by the corporation.

Was this controversial?

The Government says it did so to smooth out long-term volatility and give more certainty. Labour counters that it has been using money from ACC in its quest for surplus.