Govt forecasts 25pc drop for claims levy on past accidents

By Brian Fallow

WELLINGTON - The Minister of Accident Compensation, Murray McCully, predicts a 25 per cent fall next year in the residual claims levy - the payroll tax imposed to cover the ongoing cost of past workplace accidents.

The levy is intended to pay off over 15 years the unfunded liability in the ACC employers account, estimated to be just over $4 billion when the scheme closes on June 30.

The levy for the coming year, payable on May 31, has been set at 67c for every $100 of payroll, but Mr McCully said better case management by ACC was reducing the size of the tail and should see the levy come down in the future.

"We are expecting that next year we will be able to have a smaller residual claims levy, closer to 50c than 67c, he told a media briefing on the reforms yesterday.

"Perhaps even a tad below 50c."

With 50 days to go before the Accident Insurance Act comes into effect to make workplace accident insurance contestable, Mr McCully urged employers to shop around among the six insurers competing for their business.

Anecdotal evidence suggests a wide range of premiums on offer. Employers who have not chosen a private sector insurer by then will default to @work Insurance, the new state-owned enterprise.

Mr McCully said @work Insurance had been capitalised at $149 million on the assumption that its long-term market share would be around 20 per cent.

In the short-term it might be higher than that, perhaps 30 per cent, despite a UMR Insight poll in March which found 84 per cent of employers said they would be ready to switch to a private sector insurer by July 1.

However, in the same poll, 42 per cent of employers said they knew "not that much" or hardly anything about the ACC changes.

In addition to the residual claims levy, employers face a payment for the current transitional quarter, premiums to their new insurer and, in 70 per cent of cases, one final year's payment to ACC.

To soften the cashflow impact the Government has put forward proposals on how that final year's payment could be spread over three years.

But the proposals include interest and penalty provisions for the second and third years which have been roundly condemned by representatives of employers and manufacturers.

Mr McCully said a decision on the spreading regime would be made within two weeks.