Looking beyond ACC CoverPlus Extra for ACC savings

A common complaint from business owners with larger size construction companies is having to pay ACC levies for staff that never set foot on a building site or use any tools – here’s an example of how your company ACC levies can be minimised in this type of situation.

Peter owns a construction company called ABC Construction Limited, he employs sixteen staff, including himself. Nine of his staff are qualified tradespeople or apprentices, the rest are site managers, engineers, or administrators, there’s also Peter, who’s the director.

Here’s the issue:

Under the default ACC levy arrangement, all staff members are grouped in together under the construction company, which means, Peter is having to pay construction industry ACC levies for all his staff despite some of them being office bound.

See figures below:

Total annual payroll of $1,000,000 X residential house construction levy rate = $22,415

Total levy: $22,415

Here’s the solution:

By separating out the trade staff from the managerial, consulting, and admin staff, and paying them from a new management and consulting company, the total staff ACC levy dropped $6,674 per year.

See figures below:

Trade staff annual payroll of $550,000 X residential house construction levy rate = $13,878

Plus

Non-trade staff annual payroll of $450,000 X management and consulting levy rate = $1,863.00

Total levy: $15,741
Total savings: $6,674

There are costs to consider, like registering a new company, additional annual financial statements, and a few hours of your accountant’s time. Generally, the ACC savings far outweigh the cost of setting up the new company. Any proposed changes need to be discussed in depth with your accountant to ensure there are no negative tax implications.