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ACC and Self Employed Business Owners qwert

In New Zealand we have over 470,000 SME businesses. They make up more than 99% of all businesses in the country and account for about 60% of national employment. They rightly deserve to be called the ‘backbone’ of our economy.

During my time in the insurance industry, I have consistently seen the problems that these business owners face, when they are unable to work, due to either sickness or accident.

Every working New Zealander contributes to ACC, either through their PAYE, or through invoiced levies, based on the industry they work in. Why then do I have my self employed clients, accountants, and other professionals, tell me that this compulsory insurance will not work for most SME business owner at claim time?

There are a number of reasons.

Does the SME Business Owner split their income with their spouse?

For tax efficiency, a lot of accountants will suggest income splitting. The problem at claim time, is that the income that they show as being earned, is not a true reflection of the persons actual earning capacity, and as such, any payments made from ACC resulting from a claim, are substantially less.

An example of this is if Jim earns $100,000. His accountant could apportion this money to $62,000 Jim and $38,000 to his spouse.

In the event of an ACC Claim, Jim will only get 80% of $62,000 which is $48,000. Less than half of what he actually earned!

Can the SME Business Owner prove their loss immediately at claim time?

I am always concerned when I hear an SME business owner advise that their accounts aren’t up to date, and they are still waiting for their accountant to prepare their financials as ACC requires this information to calculate what is owed.

This issue can be alleviated by ACC CoverPlus Extra, which is the agreed value contract that ACC offers to self employed people who take their income from business drawings.

It would be nice to think that this was the problem solved, BUT ACC only covers individuals for accidents. If an SME business owner has an illness that prevents them from going to work, they will not receive any ACC payment, and therefore the importance of having other income or business revenue contracts in place, is paramount, to ensure the survival of the business entity during this time.

There are over 100 sets of policy wordings in the New Zealand market for income based insurance products. For a self employed business owner, it is essential that they understand what type of contract they have, and how it would work in the event of a claim.

Questions to ask are:

  • What type of offsets does my contract have?
  • Are their partial payments available, in the event of being able to only work part time?
  • Will this income be taxed when on claim?
  • Should I be claiming the premium as a tax deduction?
If you are unsure that you have the ‘right’ contracts, please do not hesitate to contact me to discuss.
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For many, insurance policies and their wordings can be confusing. Often the reason and purpose of contracts are forgotten over a period of time, and need to be re-explained. If you would like a no obligation review of your existing risk insurances (life, major illness (Trauma) cover, total and permanent disablement, income protection and medical covers), please contact
Core Products/Services
  • Life insurance
  • Trauma (Major Illness) insurance
  • Permanent Disablement insurance
  • Income Protection
  • Medical Cover
  • Business Insurance
  • Generate Kiwisaver
Registered Financial Advisor colleen la touche Colleen La Touche’s approachability, down-to-earth nature, and keep-it-simple approach mean clients understand their insurance contracts and how they will work at claim time, without any confusion.
Referral programme referrall A referral is the best compliment I can receive. If any of your friends, family or business associates require assistance with insurance, please get in touch.
“When it comes to Insurance I want the best cover. Being self employed and a solo mum I needed all the help I could get! Now I'm covered, stress is out of my life...”Jessica | Auckland
“Thank you for making it so easy to put in that claim, clearly explaining things, meeting with us around our schedules and most importantly just being there for us. You’re amazing.”Ray and Kirsty | Auckland
“Colleen La Touche has been my insurance advisor for a number of years now and I have always enjoyed her professional yet personal advice in respect of my insurances...”Mark | Auckland
“On behalf of my wife and I, we wish to express our gratitude in your highly professional yet personal approach. You provided empathetic support and encouragement beyond what...”Winston | Auckland
"It was an absolute pleasure to deal with you, and we are so grateful for your thoroughness (don't know if thats a word, but it fits my meaning), as Scott and I feel we have covered all bases now and feel secure..."Scott and Lee | Tangiteroria
"I worked with Colleen at Solutions and experienced first hand how dedicated she is to clients. Her knowledge of insurance products is second to none and she is constantly asked for advice by other advisers..."Tony | Gulf Harbour