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Inland Revenue

Tax Policy

PUBLISHED 28 March 2000

New ACC legislation has minor tax implications

Legislation making the ACC the sole workplace insurer from 1 July 2000 was enacted on 25 March. Associated changes to tax legislation include the addition of provisions specifying when the employers' premium is deductible for tax purposes. For a summary of the legislation and the tax implications see Tax implications of new ACC legislation.

Tax implications of new ACC legislation

Accident insurance legislation introduced into Parliament in December was enacted on 25 March as the Accident Insurance (Transitional Provisions) Act and the Accident Insurance Amendment Act.

From 1 July 2000 the Accident Compensation Corporation (ACC) will insure all employers for workplace accidents. From 1 April 2000 no new accident insurance contracts can be written by the private sector, and from that date new employers and uninsured employers will be covered by the ACC. Private insurers will remain responsible for the continuing cost of workplace accidents that occur between 1 July 1999 and 30 June 2000 for which they have provided cover.

A new section has been inserted into the Income Tax Act 1994 to specify when the employers' premium is deductible. New section ED 1B provides that the employers' premium is deductible in the income year the premium becomes due and payable. Special rules apply when the taxpayer is a client of an agent and has an extension of time for filing income tax returns.

To enable the ACC to identify liable employers and assess the premium payable by those employers, a new section has been added to the Accident Insurance Act 1998. New section 281G allows the ACC to seek information from Inland Revenue on employers and the total wages and salary paid.

Other tax-related changes are very minor.

Inland Revenue will continue to collect the following on behalf of the ACC:

Residual claims levy. Payable annually by employers, the self-employed and private domestic workers. It funds the continuing cost of work-related injuries sustained before 1 July 1999 and non-work injuries sustained before 1 July 1992.

Earners' account levy. Payable annually by the self-employed. It funds the continuing cost of non-work injuries sustained between 1 July 1992 and 1 July 1999.

Earner premium. Payable by all employees, including shareholder-employees and private domestic workers. It provides employees with continuing cover from the ACC for non-work injuries. The earner premium includes the earners' account levy and is collected by Inland Revenue as a component of PAYE deductions from employers or as part of the end-of-year return for the self-employed.