The amount that earners must pay to cover accidents that happen outside of work will reduce next year, Accident Insurance Minister Murray McCully announced today.

The levy will reduce from $1.40 (including GST) per $100 earned to $1.30 (including GST) from 1 April 2000.

The Government has also decided to reduce the residual claims levy that employers and self-employed people pay for past Employers Account claims from an average 67 cents per $100 (GST exclusive) of payroll to an average 40 cents per $100 (GST exclusive).

The reduction will also take effect from 1 April 2000.

The ACC Board recommended to the Government that the earners levy reduce to $1.20 and the residual claims levy reduce to 39 cents.

“The Government considered the recommendations carefully,” Mr McCully said. “We believe we have taken fiscally responsible and prudent decisions in settling on smaller reductions than those recommended by ACC.

“In reducing the earners levy to $1.30 we also reduced the length of time it will take for the account to be fully funded,” Mr McCully said.

“Reducing the levy to $1.30 will mean that the account will be fully funded in five years, rather than in ten years with the ACC recommended $1.20.”

The new earners levy is made up of a premium of 95 cents per $100 earned and 20 cents per $100 to pay the on-going costs of non-work injuries that happened after 1 July 1992. GST adds 14 cents. The levy is rounded to $1.30 for collection purposes.

The levy is collected from earners by Inland Revenue through PAYE. Businesses pay the residual claims levy annually, also through Inland Revenue.

The residual claims levy funds the future cost of work injuries sustained before 1 July 1999 and non-work injuries sustained before 1 July 1992. At 30 June 1999 this was estimated at $3.4 billion. This would be the total amount required in the bank now to meet the cost of providing entitlements for current claims in the future.

“While ACC has made good progress in reducing the tail of claims,” Mr McCully said, “the Government felt it was important to maintain a margin for prudence with the residual claims levy.

“As the tail of claims reduces over time, those who continue to receive support from ACC are likely to be those who have been most severely injured and who will continue to need long term on-going support. An additional small margin means that there is greater certainty that enough is collected to support those claimants. We therefore decided to reduce the levy to 40 cents rather than the ACC recommended 39 cents.”

The margin for prudence means that a total margin of around 15% of the outstanding claims liability as valued at 2014 will be built up over time.

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