An ACC invoice lands every year and most business owners pay it without really knowing what it covers. Here is what the levies actually pay for, how they are calculated from the income on your tax return, when your first bill arrives, and which parts you can claim as a deduction.
Key takeaways:
- ACC provides no-fault personal injury cover for everyone in New Zealand, including the self-employed.
- Self-employed people pay the Earners' Levy, a Work Levy that varies by industry, and the Working Safer Levy.
- From 1 April 2026, the Earners' Levy is 1.75% of liable earnings, capped at $156,641 (up from 1.67% on $152,790 the previous year).
- The Work Levy and Working Safer Levy are tax deductible. The Earners' Levy is not deductible for sole traders and shareholder-employees, because it covers non-work accidents.
- ACC invoices arrive after your first year of business and are based on the income you declared on your tax return.
What is ACC and why do I pay it?
ACC stands for Accident Compensation Corporation. It provides no-fault personal injury cover for everyone in New Zealand, including self-employed people. If you are injured and cannot work, ACC covers your treatment costs and can provide income compensation. In return, you pay levies.
The system replaces the right to sue for personal injury. You cannot generally take legal action against someone who injures you in New Zealand. ACC handles it instead. That is why every working person, including the self-employed, contributes.
What ACC levies do I pay as a self-employed person?
You pay more than one ACC levy, and they fund different things.
- The Earners' Levy is a flat rate applied to your liable earnings. From 1 April 2026 it is 1.75% of your earnings, capped at $156,641 (it was 1.67% capped at $152,790 the previous year). It funds cover for injuries that happen outside work.
- The Work Levy varies depending on your industry, because some types of work carry more injury risk than others. A desk-based consultant pays a very different Work Levy from a builder. The classification is set by your Business Industry Code (BIC) when you declare your industry to ACC.
- The Working Safer Levy is a smaller flat levy that funds workplace health and safety regulation.
The levies appear together on your annual ACC invoice. The breakdown is shown on the invoice if you want to see how each component is calculated.
How is my ACC invoice calculated?
ACC uses the income you declared on your tax return to calculate your levies. Your invoice for a given year is based on the income from the year before. This means your first ACC invoice arrives after your first year of business. It usually lands from September onwards.
If your income changes significantly from one year to the next, your ACC levies will adjust accordingly the following year. You can also request a reassessment if you think the invoice is wrong, for example if you stopped trading partway through the year or your industry classification is incorrect.
When does my first ACC invoice arrive?
After your first year of trading. ACC waits until you have filed your first IR3 return so they have an income figure to base the levy on. Once your return is filed and assessed, ACC issues an invoice for the year just ended, usually from September onwards.
In practice, this means your first ACC bill arrives 18 to 21 months after you started trading. It often catches new business owners off guard, especially since it covers a full year of levies in one lump sum.
What is the difference between CoverPlus and CoverPlus Extra?
When you start as a self-employed person, you automatically get CoverPlus. This bases any compensation payments on your actual earnings. If you are injured, ACC looks at your declared income and pays compensation as a percentage of that figure.
CoverPlus Extra lets you choose a fixed level of cover in advance. You agree the cover amount with ACC, and that is what you would receive if injured. It removes guesswork and can be aligned with your income protection insurance.
CoverPlus Extra makes sense if your income is variable or hard to prove (for example, a new business with low recorded earnings) or if you want certainty about what you would receive. For most established sole traders with steady income, standard CoverPlus is fine.
How do I make sure I claim my ACC levy as a deduction?
Not all of your ACC invoice is deductible, so this is worth getting right. The Work Levy and the Working Safer Levy are tax deductible, because they relate to your business activity. The Earners' Levy is not deductible for sole traders and shareholder-employees, because it is cover for non-work related accidents.
When you pay your ACC invoice, record the deductible portions as a business expense in your accounting software. Do not let the invoice sit in a folder until tax time. The deduction reduces your taxable income for the year you paid it.
If you missed claiming the deductible portion of ACC levies in previous years, you can usually request an amendment to the relevant tax return within four years of the original filing.
Can I dispute or reduce my ACC invoice?
Yes. If your income figure is wrong (for example, you stopped trading partway through the year), or if your industry classification does not reflect what you actually do, contact ACC and request a reassessment.
You can also reduce your levy by switching to CoverPlus Extra at a lower cover level if your circumstances allow it. This is most relevant for high earners who feel they are paying for cover they do not need at the higher levels.
Do I still pay ACC if I have a PAYE job alongside my business?
Your PAYE employer deducts the Earners' Levy as part of your PAYE. On your self-employed income, you pay the Earners' Levy again on those earnings (up to the cap), plus the Work Levy and Working Safer Levy for your self-employment activity. The Earners' Levy cap of $156,641 applies across all your earnings combined, so once your total earnings exceed that figure, no further Earners' Levy is charged.
In practice, ACC reconciles this when they assess your invoice. If you have already paid the maximum Earners' Levy through PAYE, you only pay the Work Levy and Working Safer Levy on your self-employed income.
Frequently asked questions
How much will my first ACC invoice be?
It depends on your income and industry. For a sole trader earning $80,000 in a low-risk industry, you could expect a combined levy somewhere between $1,500 and $2,500. Higher-risk industries (construction, agriculture, transport) can pay significantly more.
Can I pay ACC in instalments?
Yes. ACC offers payment plans on request. You can spread the invoice over multiple instalments rather than paying it all at once. Contact ACC directly to arrange this.
What happens if I do not pay my ACC invoice?
ACC may charge late payment penalties and interest, and they can pass overdue amounts to debt collection. You can also lose access to cover if levies are unpaid. Always pay or contact ACC to arrange a payment plan if you are struggling.
Which parts of my ACC invoice can I claim as a tax deduction?
The Work Levy and Working Safer Levy are deductible because they relate to your business. The Earners' Levy is not deductible for sole traders and shareholder-employees, because it is personal cover for non-work injuries. Your invoice shows the breakdown, so record the deductible portions when you pay.
Afirmo helps you record the deductible portions of your ACC levies the moment they are paid, so nothing is missed at tax time. Start a free trial at afirmo.com.