What the ACC earners' levy pays for
It is on every payslip, it is not income tax, and it stops being charged above a set income. Here is what it is and why it is separate.
On this page
- What it buys
- Cover for non-work injury
- Who pays
- Every earner
- Charged on
- Income up to an annual cap
- Is it tax
- No, it is insurance
It is insurance, not tax
The earners' levy funds ACC cover for injuries that happen outside work. Break an ankle on a weekend and the treatment, and the weekly compensation if you cannot work, come out of the fund the levy pays into. Injuries at work are funded separately by a levy your employer pays.
That distinction is why it appears as its own line rather than inside your tax rate. You are buying something specific, and unlike income tax the amount is capped. Inland Revenue publish the rate inclusive of GST, so the 1.75% below is what comes off your pay rather than a figure GST is added to.
The cap is the part people miss
For the 2026-27 year the levy is $1.75 per $100 of liable earnings, which is 1.75%, and it applies only up to $156,641. Above that it stops, so the most anyone pays is $2,741.22. Someone on $300,000 pays the same $2,741.22 as someone on $156,641, which is 0.91% of their income against 1.75% of theirs. It is the one deduction on a payslip that becomes proportionally lighter as income rises.
Why your effective rate is not your tax bracket
Adding the levy to income tax and calling the result your tax rate overstates what you pay in tax and understates what you get for it. The calculator on this page keeps them apart for that reason, and reports an effective rate that covers tax and levy but excludes KiwiSaver, which is your own savings rather than a deduction.
Why the levy is not a line you can change
Unlike KiwiSaver, there is no rate to choose and no way to opt out while you are earning. Self-employed people pay it too, through a different mechanism and often on a provisional basis, which is why a first tax bill after going out on your own is larger than the income tax alone would suggest.
The trade is that cover does not depend on having paid. ACC covers injury regardless of whether the levy on your particular income has been collected yet, and regardless of fault.