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Our levy recommendations to Government for 2019 to 2021
We’re recommending to Government that the levy on petrol remains unchanged for the 2019 to 2021 period. This follows feedback from the public during our levy consultation.
We received more than 6000 submissions through our consultation website Shape Your ACC. This is six times more than the last levy round two years ago.
Most submissions received related to the levies we collect to pay for road injuries.
“Motor vehicle injury claims have increased by 6% for the last five years and costs by $100 million. This reflects the growth in weekly compensation claims and costs for serious injuries. Auckland Transport figures show that serious injuries on roads have increased nationally by 37% in the last four years and, in Auckland, by 73%,” ACC Board Chair Dame Paula Rebstock says.
“The true costs of new motor vehicle claims would require the average Motor Vehicle levy to be set at $165.08. However, we’re able to recommend a levy that is $37.40 lower.”
The reasons for this include:
- strong solvency of the scheme
- investment performance
- positive impact of our transformation programme
- greater investment in injury prevention to avoid injury costs.
“The ACC Board has carefully considered public feedback in our recommendations to the Government,” Dame Paula says.
“We’ve also kept in mind that when we set levies for vehicle owners, we need to balance feedback with adhering to the Government Funding Policy to make sure the money we collect will cover the lifetime costs of all injuries that happen on our roads.
“As a result, we’re recommending collecting a higher proportion of motor vehicle account levies via rego rather than increasing the petrol levy by 1.9 cents as we had originally proposed.”
Our recommendations to Government
The changes we’re recommending to ACC Minister Iain Lees-Galloway include:
- Decreasing the average Work levy for employers by 5 cents from $0.72 to $0.67 (a 6.9% decrease) for every $100 of liable earnings
- Increasing the Earners’ levy for workers by 3 cents from $1.21 to $1.24 (a 2.5% increase) for every $100 of liable earnings
- Increasing the average Motor Vehicle levy for road users from $113.94 to $127.68 (a 12.1% increase). But, the funding split will shift to 66% from the rego and 34% from petrol. This keeps the petrol charge at 6 cents per litre with no increase but still increases the average motor vehicle levy to $127.68.
During the consultation, we recommended increasing petrol to 7.9 cents per litre. In 2013 and 2014, the average Motor Vehicle levy peaked at $333. That’s 161% higher than the average rate of $127.68 we’re recommending for the 2019 to 2021 levy period.
Public submissions raised concerns about the proposed increases to the Earners’ levy and the Motor Vehicle levy. However, we’re recommending to the Government these proposed increases go ahead because of:
- cost pressures from increasing claim numbers, serious injuries and medical costs
- the impact of pay equity
- expected lower investment returns.
This will make sure the accounts remain fully funded.
We’ll also be introducing incentives to reward businesses for making workplaces safer.
We’re recommending motorcycle levies increase in proportion to the average Motor Vehicle levy. Motorcycles remain heavily subsidised by other vehicle owners.
We received significant support for the Ride Forever rebate programme, and we’ll be considering some changes to the programme.
As part of our future work, we’ll investigate discounts for multiple vehicles and distance-based levying. Reviews of the Fleet Saver programme and the No-Claims Discount programme will also happen.
How we set levy rates
We calculate levy recommendations to the Minister according to the Government Funding Policy. Levy rates are based on the estimated lifetime costs of new claims and the funding position of our levy accounts as at 30 June 2018.
The funding policy set in 2016 establishes rules on how ACC should set levies to respond to changes in new-year claims costs/numbers and scheme solvency positions. It was put in place by the Government to smooth levy changes over multiple years, ensuring businesses and households were not impacted by significant levy increases.
“Right now, we’re in the fortunate position where we have more money invested than is needed to cover the lifetime costs of the injuries on our books. Therefore, we’re using some of these funds to make the levies cheaper,” says Dame Paula.
“Rather than using it up in one go, we spread the reductions out over a number of years to avoid big fluctuations in the levies that people pay. Unfortunately, these gradual reductions are not enough to offset the growing number and costs of accidents. If the number and severity of accidents keep growing, levies are likely to continue to rise in the future.
“If we did use our surplus to keep rates on hold, this would deliver a short-term gain for levy payers. But in the long-term, New Zealanders would have to shoulder bigger and sharper increases to cover the cost of the shortfall this would create.”
This will make sure we can cover all injuries from accidents today, and in the future.
You can find our levy recommendations on our consultation website: