Looking Ahead: Scheme coverage & funding proposals

Looking Ahead: Scheme coverage and funding proposals

The Minister for ACC has requested that ACC undertake a review of the coverage of each of the seven accounts within ACC over the next six months.

In particular, she has asked that ACC review: whether the Self-Employed Work Account should be re-amalgamated with the Employers’ Account; whether work-related motor vehicle injuries should be allocated to the Employers’ Account and Self-Employed Work Account (the work accounts), rather than to the Motor Vehicle Account as currently happens; and whether ACC should consider using the Road User Charges system as a mechanism for funding the ACC levy for diesel and other non-petrol powered vehicles.

As a consequence, ACC is seeking your preliminary views on the issues and possible solutions identified in relation to the Self-Employed Work Account and Employers’ Account and the proposals relating to the Motor Vehicle Account. This is being undertaken along with the consultation on the 2004/05 levy rates.

Any changes to the current coverage of the seven accounts would be likely to require amendment to the Injury Prevention, Rehabilitation, and Compensation Act 2001 and therefore would be subject to the standard legislation making process that includes more detailed consultation.

Amalgamating the Self-Employed Work Account with the Employers’ Account An issue identified with the Self-Employed Work Account and the Employers’ Account is the arbitrary differentiation between businesses based on the type of business form and the consequent allocation to different accounts.

For example, ACC currently allocates self-employed to the Self-Employed Work Account, while other businesses that are similar in nature and risk, such as shareholder employees and small employers with 1 to 5 employees, are allocated to the Employers’ Account. As a result of this they are charged different levy rates.

Amalgamating the two accounts would address the issue of equity relating to business form and could potentially result in administrative efficiencies.

If the accounts were amalgamated there are various options that could be used for pricing and for recognising the differences between small and large business entitles, such as having a levy fee or charge to cover fixed costs with the remainder of the levy being based on the risk rate.

Motor Vehicle Account – Transfer of work-related motor vehicle injuries to work accounts Under the Injury Prevention, Rehabilitation, and Compensation Act 2001, the costs of most work-related motor vehicle injuries are allocated to the Motor Vehicle Account and some to the work accounts.

An issue has been raised about whether this fairly places the cost of work-related motor vehicle injuries in the appropriate account.

It is argued by some that employers need to bear more responsibility for both the conditions under which their employees use vehicles, and the cost of work-related motor vehicle injuries.

It has therefore been suggested that work-related motor vehicle accidents could be covered by the work accounts.

The cost of these claims would then be met by the employer and self-employed account levies, taking into account current contributions toward costs.

Currently, these groups contribute toward the cost of work-related motor vehicle injuries through vehicle licensing and petrol levies, and through the payment of the first week of compensation.

ACC is undertaking further work to identify the extent and nature of work-related motor vehicle injuries, current levels of claims and the financial impact associated with transferring those costs.

Motor Vehicle Account – Road User Charges system as a long-term funding option The New Zealand Transport Strategy released in December 2002 identified an increased focus on direct charging road users through such systems as the current Road User Charges (RUC).

The RUC system recovers costs from those New Zealand road users who own vehicles powered by a fuel that is not taxed at the source, such as diesel.

Because the RUC system charges road users on the basis of distance travelled, a move towards collecting ACC levies through the RUC system may be more equitable than the current annual licence fee levy.

This is because everybody pays the same annual licence fee regardless of how far they drive in any year.

People who own more than one car can also be disadvantaged, particularly if their annual mileage is low on one or more vehicles.

Collecting an ACC levy through the current RUC system for diesel and other non-petrol powered vehicles is possible in the medium term because the infrastructure already exists.

Changes would be required to Transport legislation and the Injury Prevention, Rehabilitation, and Compensation Act 2001 for this change to be implemented.

There is no existing infrastructure for a RUC system for petrol-powered vehicles. However, it may be practical and fair in the longer term to charge ACC levies on a user-pays basis for petrol-powered vehicles.

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