Govt aims to slash half a billion in ACC levies over next two years

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The government is proposing to cut half a billion dollars in ACC levies over the next two years.

ACC Minister Nikki Kaye announced this afternoon that this year’s budget will signal ACC will be in the position to cut levies by approximately $375 million in 2016/17 and $120 million in 2017/18.

The cuts are intended to be spread across the vehicle, workers and earners' accounts.

They are based on “current financial projections and a funding direction which sees each of these accounts heading towards a solvency band of between 100 and 110%,” Ms Kaye said.

However, although the government is committing to “at least” $500,000,000 in levy cuts, “it’s important people understand that the exact reductions in each account won’t be known until after public consultation.”

Ms Kaye said the reductions will be possible “because of ACC’s sound financial performance under the current government, which means the scheme is now essentially fully funded. In other words, it now has enough money invested to meet the future costs of all current claims.”

The ACC minister also announced she is introducing legislation that will establish a new framework for setting ACC levies and will take effect in 2016/17.

The legislation is intended to correct “an inconsistent approach to levy setting, marked fluctuations in levy rates and some confusion about the factors driving final decisions on levies.”

New binding principles will be introduced to ensure the scheme is adequately funded to withstand economic volatilities, while ensuring levies are kept as low as possible and stable over time, thus “demonstrating that we’re not over-collecting,” Ms Kaye said.

The legislation will also require ACC to publicly report on the long-term implications of the government’s levy decisions and enable the residual levy – which funds the continuing costs of claims made before 1999 – to be discontinued when those costs have been fully funded.

Existing legislation requires that the residual levy be collected until 2019, regardless.