Joe is a self-employed arborist. Very healthy and loves his job. Last month he fell out of a tree and broke his back. He’ll be off work for a long time, but at least he’s got ACC. On average he makes $80,000 a year, so even at 80% of that, he’ll be okay.
You can understand his anger when his first weekly payment from ACC was only $430! How could this be?
ACC has two types of cover for self-employed people, Cover Plus and Cover Plus Extra (CPX). Joe is on Cover Plus, which is the default.
Last year was a bad year work-wise and Joe only made $56,000. To make matters worse, he splits his income with his wife for tax purposes. ACC paid him 80% of half of $56,000, which is only $22,400 p.a., hence the $430 per week.
Had Joe taken out CPX for the full $80,000, ACC would have paid him $80,000, regardless of what he earned last year or how he splits his income for tax purposes. Joe can change to CPX now, but it won’t cover him for his back injury.
If you’re self-employed, don’t be like Joe. Talk to your accountant or financial adviser to make sure that ACC will do what you think it will.
Mark Lynch is a Financial Adviser. His Disclosure Statement is available free upon request. Any comments in this column are the opinion of the writer and should not be construed as financial advice.