ACC earners' levy

The earners' levy is not income tax. Income tax goes to the Crown's consolidated account and funds government generally; the earners' levy goes to ACC's Earners' Account and funds one specific thing — treatment, rehabilitation and weekly compensation for injuries that happen outside work.

That distinction is the reason the levy exists as a separate line. Injuries that happen at work are funded by a different pot, the Work Account, which employers pay into through the work levy. You never see that one on your payslip. What you pay through PAYE covers you for the weekend rugby injury, the fall off a ladder at home, the car crash on a Sunday drive — regardless of who was at fault, and regardless of whether you were working at the time.

In exchange for that cover, New Zealand removed the right to sue for personal injury. The levy is the price of a no-fault scheme: you cannot take anyone to court over an accident, but you also do not have to prove anyone was to blame before you get treated.

The levy applies to your liable earnings from the first dollar — there is no tax-free threshold equivalent, and no bracket structure. It is a single flat rate of 1.75% for 2026-27, applied to every dollar you earn up to the liable-earnings ceiling of $156,641.

The rate is quoted GST-inclusive, which trips people up when they compare it to the raw figure in legislation. Your employer deducts it alongside PAYE income tax and passes both to IRD together, which is why the two are often reported as one lump on a payslip and why so many people think their tax rate is higher than it is.

Salary and wages are liable. So are most other forms of employment income, including bonuses and taxable allowances. Income that is not from working — interest, dividends, most rental income — is not liable, because the levy is tied to earning capacity rather than to wealth.

Above $156,641 you pay no further levy. That gives a maximum of $2,741.22 a year, and it means the levy is regressive in a system that is otherwise progressive: as a share of income it peaks at the ceiling and falls away above it.

The logic is that ACC's weekly compensation is itself capped. If you are injured and cannot work, ACC pays 80% of your earnings up to the same ceiling — so someone on $300,000 is insured for no more than someone on $156,641. You stop paying at the point you stop being covered.

The practical effect shows up in effective tax rates. Take-home pay calculations that treat all deductions as a single percentage go wrong for high earners for exactly this reason: the levy flattens out while income tax keeps climbing. Our take-home pay calculator models the two separately, which is why its effective-rate line bends slightly at the ceiling.

Self-employed people and contractors pay the earners' levy too, but the mechanics differ. Rather than being deducted as you go, it is invoiced by ACC after you file your return, based on the income you declared. The first invoice typically arrives well after the income was earned, which catches out people in their first year of self-employment.

You also pay a work levy on top, at a rate set by your classification unit — ACC's grouping of occupations by injury risk. A roofer and a bookkeeper pay very different work levies on the same income. Neither figure appears on this page, because both depend on circumstances this reference cannot know; check your ACC invoice or the levy rate lookup on ACC's own site.

The CoverPlus Extra option lets self-employed people agree an insured amount in advance, which decouples cover from fluctuating declared income. It changes both what you pay and what you would receive, so it sits outside the standard figures in the table above.