If you’re Self Employed you Should consider ACC CoverPlus Extra

If you are self employed and think ACC will pay if you have an accident think again! You may get a lot less that you thought! 

Here’s the Problem

With normal ACC CoverPlus (Not CoverPlus EXTRA) (most people have CoverPlus) you must prove your income at the time of claim. This can be very difficult for self employed people, especially if they dont have their latest accounts completed or if they are laid up in bed or hospital. If you can’t prove income or have had a good accountant writing back all possible deductions against your income, then you may not get paid much at all.

Your income and costs may have increased since your last tax return, meaning any compensation you receive may not be enough to bridge the gap.  This is especially the case is you have a fast growing business and need cash to cover the cash gap between paying for expenses and receiving cash from customers.

Here’s part of the Solution

With CoverPlus Extra (CPX), you apply for a pre-agreed level of accident compensation.  The highest amount you can apply for is 30 percent above the income you earned last year up to a maximum of $92,871 (for 2012/2013).  ACC may consider you for a higher amount, but it’s up to their underwriting team. The process can sometimes seem complex and a little confusing, but fortunately at Assetwise we can give you free advice in this area.

Reducing your ACC Levies

If you’re self employed and are on CoverPlus EXTRA you can choose to reduce your level of accident compensation cover, and thus reduce your levies.  The minimum ACC cover is $22,464 per year.  However that mean’s you’ll only receive $432 per week before tax if you have an accident.  There are also other important ramifications associated with reducing your ACC cover and many financial advisors, and even accountants, are not familiar with how this may negatively affect you. So before you dial down your ACC make sure you talk with an adviser who is competent in this area. We have specialists who can identify ways you can reduce those risks and protect yourself and your family properly.

Work 30 hours per week, and still get paid your full benefit – You are of vital importance to the continued survival of your business.  If you weren’t around, then your business would likely stumble and gradually wither away.  With CPX, you can work up to 30 hours per week and still receive your full benefit.  On the default ACC program which all employees and self employed people are automatically enrolled, CoverPlus (not to be confused with CoverPlus Extra), you have no such luxury.

If you’re on the default CoverPlus, then your accident compensation is abated accordingly to how much you earn from your occupation.

Your partner, with a PAYE job can apply for CPX too – Your partner, as long as they have a role in your business, can apply for CPX as well.  They can even be working in another job earning a PAYE income and still opt into CPX in your business.

Income splitting couples can choose their level of compensation – Often your accountant will advise that splitting your income will reduce your personal income tax as you’ll be paying tax at lower marginal rates.  This is good advice from a tax perspective.  Often this advice is given to couples who have one partner who earns the bulk of the income, with the other partner earning less, but still contributing to the business.

The disadvantage of splitting your income for tax purposes is that if the breadwinner is off work due to an accident, then they only receive half the compensation they would normally receive.  If the breadwinner earned $100,000, and this was spilt to $50,000 for the breadwinner and $50,000 for the other partner, the breadwinner would only receive $40,000 in accident compensation (80 percent of $50,000).  For a family that is used to living on $100,000, a drop in family income to $40,000 is a major hit.

That’s why CPX is superb for income splitting couples.  You can choose to allocate more of your insurance, be it accident insurance via ACC or private income protection, towards the breadwinner whose importance to the family is much higher.

• Reinvest the levy savings into better insurance
• Agreed payout -
• Dangerous hobbies can be insured for
• Tax deductible
• Interest free loan

CoverPlus Extra isn’t perfect.  Here’s the bad news…

You have to pay in advance… Though that’s a small price to pay for the advantages it can give you.

As a business owner you need specialist advice in this area. We can help, and our service is free. Phone 09-5801111

Book Your Insurance Review

To book a review just fill out the details in the form below and we will be more than happy to get in touch to lock in an exact time and date that suits.