Overseas income – to pay or not to pay, that is the question
We were recently approached by a gentleman – let’s call him William Shakespeare who had received a chunky invoice from ACC for income earned in Australia (yep, the guy’s next door).
He came to us to ask why he had an invoice (and rightfully so) based on the income he earned in a PAYE job in Australia. We asked ourselves the same question but couldn’t come up with an answer so we thought, let’s ask ACC…
One Official Information Act request later and we had the answer – ready for this?
ACC bases the invoices they issue off the income information sent to them by IRD. We totally get that, it’s the easiest way to do it – one direct source of truth.
In the past, IRD has been unable to separate out the liable overseas income from the non liable overseas income, so nobody was invoiced. They can now do this, so 4,300 NZ tax residents were sent a wee surprise courtesy of ACC for the 2023 year.
As far as ACC is concerned, all taxpayers pay ACC levies – “ACC levies are generally charged on employment income taxable in New Zealand, which means that New Zealanders who go overseas to work but retain New Zealand tax residency may remain liable for ACC levies. New Zealanders who suffer injuries overseas may be eligible for ACC cover and entitlements, including weekly compensation based on their earnings.”
Back to William. He’s working in Australia, pays PAYE equivalent and all the right taxes including WorkersComp (Aussies answer to ACC) on his Australian income. Mr Shakespeare happens to have a property and family in NZ. Because he is still classed as a NZ tax resident, he has to pay ACC levies as well because he pays tax in NZ. Just to be ultra clear – he’s paying ACC levies on all of his income – not just the NZ earned income.
Just to cap it off, poor William has also been invoiced on a default levy code which was used by ACC because they didn’t know what William did for his income. William’s incorrect code is 02190 which is 1.7% of his income. By way of context, the average charge is only 0.63% and the lowest is 0.02%. We do get a bit cynical with ACC when they, in our opinion, are more focused on money gathering than doing the right thing.
The cost only gets exacerbated given this is actually applied to all of his income earned in Australia, not NZ as noted above (this is a whole blog in its own right). As an FYI – we fixed this for William so he's now being invoiced on the correct levy code which is less than a tenth of what ACC was going to charge him.
What’s the silver lining? Well, a couple of things.
1] Get your accountant to consider your NZ income as passive which removes that part from the equation. Passive income doesn’t require exertion so is not subject to ACC. On the downside, rental income is no longer classified as passive even if the property is managed by a property manager.
2] ACC are treating the 4,300 workers as self-employed. Should passive income not be an option, it does open the door for CoverPlus Extra (another blog again) which, if they have to pay ACC levies, is likely to be the best possible outcome for them. That, and they get to talk to us 😊
So, if you know anyone earning income in Australia and they get an invoice from ACC, don’t just pay it. Check it for the usual suspects – levy classification and full time/ part time status, then talk to the friendly Manage team about options (we don’t bite once we’ve had coffee).
Sue Walton - General Manager
Manage Group Limited
m 027 210 4918
p 0800 RISK NZ
e sue@managecompany.co.nz
