NZ workers and businesses denied $180m in ACC levy cuts

Prime Minister John Key said the cuts were the result of good management of ACC and favourable economic factors. Photo / Alan Gibson

New Zealand workers and businesses are to be denied almost $180 million in ACC levy cuts next year as recommended by the corporation, leaving it with an embarrassment of riches.

The Government has set aside the Accident Compensation Corporation's recommendation that workers and businesses receive $658 million in levy cuts next year, instead cutting them by $480 million as indicated at the Budget.

The smaller cuts were confirmed by Prime Minister John Key at an Auckland Chamber of Commerce luncheon today.

"It comes on top of previous ACC levy reductions of close to $1 billion that we announced in 2011/12," he said.

"These levy reductions are possible because of a number of factors - good management of ACC and favourable economic factors sustained over a number of years.

"As indicated in the budget earlier this year, most of the reductions will be directed at motor vehicle levies. Other ACC levies have gone down in recent years, but not motor vehicle levies and the funding of the motor vehicle account is growing the fastest of all the ACC accounts.

"For 2015/16 the average amount people will pay in ACC levies will go down from around about $330 a year to $195 a year - an average saving of around about $135 per vehicle."

The reduction was made up by a reduction in the petrol levy of 3c per litre and a reduction in ACC portion of annual vehicle licencing fees.

"The licence fee reduction also incorporates new safety ratings for cars so you'll pay an even lower fee if you have a safer car."

The cuts mean vehicle owners will pay $438 million less a year in petrol tax and registration fees.

ACC Minister Judith Collins also confirmed work account levy paid by employers and self-employed people would fall to 90 cents per $100 of liable earnings, down from 95 cents.

ACC recommended a reduction to $75c which would have saved $162 million a year.

The Government decided against cutting the earners levy which pays for non-work injuries, which ACC in recommended cutting from $1.26 to $1.20 per $100 of earnings.

That would have saved have saved salary and wage earners $69 million a year.

ACC recommended the cut to the earners account and a deeper cut to the work account following a public consultation process. Those accounts are now fully funded meaning they contain sufficient funds to meet all their future obligations.

Without cutting the levies further as recommended by the ACC they will in effect be collecting more money than they require leaving the corporation with the headache of what to do with the money.

Mr Key said he anticipated further levy cuts "across all ACC accounts" in the future now that he was satisfied that ACC was in good health.

The Government's cuts announced today

# 41 per cent reduction in the combined motor vehicle levy, totalling $438 million a year

# 5 per cent reduction in the work levy totalling $42 million a year

ACC's recommended cuts last month

# 21 per cent reduction in the work levy totalling $162 million a year

# 40 per cent reduction in the combined motor vehicle levy totalling $427 million

# 5 per cent reduction in the earners levy totalling $69 million.