It’s helpful to know what your self-employed clients need to do and what information to provide if they are injured and want to claim under ACC CoverPlus.
New to self-employment
If injured, a newly self-employed person may need to provide the following to receive lost earnings compensation:
- Confirmation of GST registration (if applicable).
- Bank statements or accounts relating to business activities, showing both income and expenditure.
- A letter from their bank confirming the existence of the business and its operation.
- Letters from customers confirming that goods or services have been provided.
- A letter from you as their accountant confirming the existence and operation of the business venture.
- Proof of purchase of goods for the business.
Lost earnings compensation entitlement
Lost earnings compensation entitlement will depend on how long your client has been self-employed.
New to self-employment:
New self-employed people are those who had commenced self-employment part of the way through the current tax year. That is, they had not yet passed a balance date (usually 31 March) when they were first incapacitated.
If they are full time, they may be entitled to the minimum level of lost earnings compensation.
Note:
ACC may also use any PAYE earnings they may have received in the 12 months prior to their injury.
Recently self-employed:
Recently self-employed people are clients who in the last two completed tax years had commenced as a self-employed part way through the most recently completed tax year. That is, they have only been in business long enough to pass one balance date (usually 31 March).
If they are full time, they will receive lost earnings compensation based on their earnings declared in the most recent tax return divided by the number of weeks they have been self-employed.
Note:
ACC may also use any PAYE earnings they may have received in the 12 months prior to their injury.
Established self-employed:
Established self-employed are those who in the last two completed tax years had been in self-employment in both tax years. That is, they had been in self-employment for at least one full tax year.
Lost earnings compensation for ACC CoverPlus is based on a self-employed persons actual earnings in the full financial year immediately prior to their incapacity as declared to the Inland Revenue.
Where the latest returns have not yet been filed, ACC can pay a short term entitlement (up to 13 weeks) based on the clients income in the next previous tax year.
Earning while claiming compensation
Will your client receive earnings during the period they are claiming lost earnings compensation? If so, we will consider whether their lost earnings compensation should be reduced to take account of the ongoing income or partial work.
How we determine earnings during incapacity
There are two ways we determine earnings during incapacity for self-employed people, depending on whether the incapacity is for part or a full tax year. These are dependent upon when the incapacity occurs in the tax year:
Incapacity length |
How earnings are determined |
|---|---|
Incapacity for part of a tax year |
Earnings are determined on the basis of either:
|
Incapacity for a full tax year |
The client can elect the amount of earnings during incapacity. Note: |
Estimates of earnings during incapacity
Estimates of earnings during incapacity can be based on either a:
- comparison of hours worked before and after the incapacity, or
- negotiated percentage or rate that estimates the earning capacity of the client.
Note:
The latter approach is best used if a direct comparison of hours worked will not result in a reliable estimate of the earnings during incapacity.
More information on the claims process
For more information on the claims process see What support can I get?
Last updated: 15 December 2008