The Hidden Gap in ACC Every Farmer Should Know

With farmers we often see that they insure their tractors better than they insure themselves. It is not intentional, of course. It is just the way the industry has always operated: head down, get the job done, and assume things will work out. The classic “she’ll be right” mindset. The problem is, when it comes to injury and income, that approach can be an expensive gamble.

Most farmers rely on the ACC to provide a safety net if something goes wrong. ACC is a strong system by international standards. If you are injured, it can cover treatment costs and provide compensation for lost income, generally at around 80 percent of your earnings. On paper, that sounds reassuring. But in practice it often falls short for farming businesses.

The key issue lies in how ACC calculates your entitlement. Your level of cover is based on your taxable income. For salaried employees, that usually reflects their actual earnings. For farmers, it often does not. Many farming businesses are structured to be tax-efficient, with income smoothed across years or retained within the business. As a result, taxable income can be significantly lower than the amount a household actually relies on to live.

This creates a disconnect. Some years you may have a loss, or a very small profit, and if you have an accident the following year ACC will rely on those latest IRD individual earnings to calculate your entitlement – 80% of nothing is, well, nothing. Luckily, ACC do have a minimum weekly compensation amount, this currently sits at $752 per week, before tax, the equivalent of $39,000 per year.

Injuries rarely occur at a convenient time. It might be during calving, lambing, or harvest, periods when labour demand is high and the margin for error is low. If you are unable to work for several weeks or months, the cost is not just your lost income. It is also the cost of bringing in relief labour, maintaining production, and keeping the operation running smoothly. Sit down and ask yourself, is $752 a week enough for that?

This is where ACC CoverPlus Extra can be really useful. CoverPlus Extra allows farmers to agree, in advance, the level of income they want insured, rather than relying on historical taxable income. CoverPlus Extra gives you some certainty, you know what will be paid, and you can plan accordingly. It shifts the situation from reactive to managed, which is where good farming businesses aim to operate.

Of course, higher levels of cover generally mean higher ACC levies, and that is often where hesitation sets in. It is easy to view levies as just another expense to minimise. However, it is worth reframing that thinking. The real question is not what the cover costs, but what it would cost if you did not have it. A few extra thousand dollars in levies can be insignificant compared to the financial pressure of being unable to work during a critical period.

From an accounting perspective, one of the most valuable exercises farmers can do is step back and consider their true income needs. Not what the accounts say, but what it actually takes to run the household and the farm. If you were out of action for three months, what would you need each week to keep everything moving? Once you have that number, it becomes much easier to assess whether your current ACC cover is fit for purpose.

Farming will always carry risk. Weather, markets, and regulation are largely out of your control. But how you protect your own ability to work is something you can control. And in many cases, it is the difference between a temporary setback and a long-term financial strain.

Remember, ACC only covers injuries. Illness, whether it is something sudden or long-term, is not included.

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