ACC levies can be a significant cost for businesses operating in high-risk industries such as forestry, construction, and road freight transport among many others. We see more and more clients burdened by the costs associated with operating in a high-risk industry while also paying significant ACC on wages to employees not involved in the high-risk work. An example might be a freight and logistics company with a head office servicing considerable management and administration needs.
Typically, only one classification code can be applied to a company for the employer ACC levy imposed on it. As a result, salaries issued to management and administration staff not undertaking high-risk work are required to have levies paid at the same rate as the company’s main activity.
To allow for fairer ACC levies to be applied to the salaries of employees not undertaking high-risk work, you could consider setting up a new company to employ the business’ administration staff. The benefit being lower ACC rates for the administration staff compared to retaining the administration staff in the existing business where they would be subject to higher ACC rates. A management fee would then be charged by the new company to the existing company for the cost of the administration staff.
Of course, consideration must be given to the additional compliance costs of running a separate company; preparation of GST returns, financial statements and tax returns, as well as Companies Office fees. This structure would therefore best suit companies in high-risk (and therefore high-ACC levy) industries with a large number of administration staff.
If you are interested in restructuring your business in this way, please contact your Hayes Knight advisor, who will be able to prepare a cost-benefit analysis to determine whether your business would benefit from this approach.