Next to income tax on your payslip sits a smaller deduction most people never question: the ACC earners' levy. It is not a tax — it is the premium for New Zealand's universal, no-fault injury cover, and it works quite differently from income tax.
What the levy pays for
The earners' levy funds cover for injuries that happen outside work — at home, on the road on personal time, playing sport. Work injuries are covered by a separate levy your employer pays. Because cover is universal, you cannot opt out, and in exchange you generally cannot sue for personal injury in New Zealand.
A flat rate, up to a ceiling
For the 2026-27 year the levy is 1.75% (GST inclusive) of your earnings, but only on the first $156,641. That gives a maximum levy of $2,741.22 a year. Every dollar you earn above the ceiling pays no levy at all.
A worked example: on a $60,000 salary the levy is $60,000 × 1.75% = $1,050 a year, about $20 a week. On a $200,000 salary it is capped at $2,741.22 — the same as someone on $156,641 pays. This is why the combined tax-plus-levy line flattens slightly for very high earners.
It moves every year
The rate and the ceiling are set by regulation and adjust most years: 1.60% to $142,283 in 2024-25, 1.67% to $152,790 in 2025-26, 1.75% to $156,641 in 2026-27. It is one of the reasons a “same salary” can produce a slightly different take-home figure from one April to the next.
What it means for your budget
For most earners the levy is roughly one to two percent of gross pay — real money, but stable and predictable. When you compare job offers or model a pay rise, remember that the levy applies to the new dollars too (until the cap), so the take-home difference is always a little smaller than the gross difference. The take-home calculator applies the correct year's rate and cap automatically.
The cap applies per job, not per person
Each employer deducts the levy on the earnings it pays, and each applies the ceiling to that employment alone. If you hold two jobs and your combined income exceeds $156,641, neither employer can see the other, so between them they may deduct more than the annual maximum of $2,741.22. This is a known feature of the system rather than an error, and an over-deduction can be sorted out with Inland Revenue — but you have to notice it first. If you work more than one job at a decent income, it is worth adding your levy deductions up at the end of the year.
What the levy does not cover
ACC covers injury, not illness. A back injured lifting something is covered; a back that deteriorated over years may not be. Cancer, heart disease and most other conditions fall outside the scheme entirely, which is the gap income protection and trauma insurance exist to fill. Weekly compensation, where it applies, is also a proportion of your previous earnings rather than all of them, and it is subject to its own maximum. Knowing where the cover stops is what turns the levy from an unexplained deduction into a considered part of your financial picture.
How it sits beside income tax
Income tax is progressive; the ACC levy is flat up to a ceiling. That is why charts of “effective rate” sometimes show a slight flattening for high earners even as marginal income tax stays high: the levy has stopped growing while tax has not. When you read a payslip, treat the two lines separately — one is IRD income tax, the other is ACC cover.