ACC flaw catches self-employed

By VERNON SMALL

Accident Compensation officials are grossly overcharging hundreds of self-employed people for cover in the March 2000 year by basing levies on 1999 earnings.

The overcharging, which hits those who earned less last year than in 1999 or who switched to wages after being substantially self-employed, means some clients have been forced to pay up to 400 per cent more for cover than they should.

After inquiries from the Herald, ACC said it would look at fixing the problem, but it is yet to give an assurance on refunds.

In one case, a builder was charged 15.8 per cent of his total income in premiums.

His earnings had fallen from $22,747 in 1999 to $8335 a year later but his ACC bill was more than $1300. A levy based on his actual earnings would have been $388.

In another case a business-management consultant was charged $959 when the levy should have been $157 because the self-employed component of his income had dropped so much.

Wellington accounting firm Millar and Miller has written to the Chartered Accountants Journal highlighting the problem ahead of a meeting between ACC and the Society of Accountants in March.

Partner Diane Miller said the issue emerged from the transition between different Government policies. The previous National Government had opened workplace insurance to private-sector competition, but the Labour-Alliance Coalition had returned to a state monopoly. During the changes there was a switch from paying premiums in arrears to paying in advance.

The self-employed mostly stayed with ACC during the brief period of private-sector involvement and had expected things to stay the same, she said.

ACC advertising had told the self-employed "relax, you're covered," but nowhere did it point out the implications for someone earning less last year than in 1999.

There was no provision for reassessment when the true figure was established.

"If you earned a low income in 1999 and high income in 2000, you win. If it's the other way round, you lose big-time," Diane Miller said.

"We would have thought it would be logical that an adjustment would be made to account for these circumstances and top-up payments and refunds would be made. 'Not so for 2000,' says ACC.

"We are of the opinion that there is a gross injustice in how ACC levies are being charged to the self-employed for 2000."

There is not a problem for the year to March 2001 because the regulations provide for a recalculation of premiums once actual income is determined.

But accountant Carol Kelly said the March meeting with ACC could be too late.

After sending out bills in September, ACC was now making final demands, threatening court action and negative credit reports. It had refused to negotiate lower premiums, she said.

Many clients were paying rather than risking their credit ratings.

ACC Minister Michael Cullen told the Herald he would have officials review the overcharging.

"It does sound like there's a problem there."

Self-employed people could now get help to avoid the problem, but it appeared there had been an anomaly last year, he said.

ACC spokesman Richard Ninness said the corporation was applying the law as it stood.

"But we are aware of those regulations just being applied to rule of letter and creating hardships or difficulties for some people. So we are looking at what can be done to make the system fairer in those situations [for that premium year]."

He could not say whether those who had already paid would get refunds, but he was optimistic that a fairer system could be put in place.

Those affected who had not paid their 2000 premium but who feared court action, or damage to their credit rating, should contact the corporation's business service centre.