This is what we achieved for one of our clients without getting creative on cover levels and types of cover, the creative bit is likely to be another $2-3000 per annum ongoing.

So what have we achieved?

We've managed to achieve a $2,500 per year average saving on what they were previously doing and this applies to what they do going forward. Add to this an additional $2000 per annum after restructuring how they're covered, giving an expected savings of $4,500 per annum ongoing.

Significant in most people's book, so how did we achieve this?

Quite a number of companies today are operating under a number of brands and different company structures. In this case it was a housing construction company that has been around for over 20 years.

In recent times, with the addition of a succession plan, new blood to the shareholding and diversification of the business's operations, they established 3 new companies.

Where all of this gets interesting with ACC, is the ACC levy classifications on the companies were set up similar to the names of the companies. Meaning they were levied at the trade rating equivalent to a builder for everything.

With the success of the companies they were looking at ACC levy account invoices of around $22,000 for all of the company's, which is where I was brought in by the company accountant.

As I covered in the blog about the ACC levy review for vehicles, this case is all about the risk assessment. ACC have about 500 individual occupation levy classifications, this is how ACC assesses risk. Each of the classifications have a type of activity associated with them and the levy is reflective of the ACC accident risk for each classification.

So what does this mean in this case?

Because the initial classification codes on the company's were setup for house construction they were done reflective of the name of the company, rather than the risk of the actual activities each company is exposed to.

I'm not going to go into specifics on the classifications used, for two reasons. To protect my clients privacy, as it makes them quite identifiable and the other is, the specifics likely won't apply to your situation as every situation is a little bit different and there's some financial risk to you in not getting it right. A better answer is to give me a call and we can talk specifics for your situation.

Ok back to this case

When I sat down and discussed the situation with the company accountant and business owners, I found we had 5 trading companies making up their operation.

What this immediately creates is a cross entity ACC levy issue as each shareholder is levied on each company, if their total income across all companies is greater than the ACC maximum, then they'll pay more than they have to. In this case the accountant was aware of it and had it under control, so no recalculating things there. If this was not considered, it could have resulted in about 25% more levies than we were looking at.

What it did highlight is the questions about the actual activities of the individual companies. Yes they build houses, but the actual building work only happens under 1 or 2 of them, not all of them.

Stepping back a bit and looking at the building process you'll get a better picture of where I'm coming from.

As a client, you approach a building company to build you a new home. You sign a contract with that company and as far as you are concerned, they are doing the work.

The reality is the earth works for the foundation are probably sub contracted out, as is the foundation. Both of these activities have different ACC risks.

Once the foundation is down, the floor goes down, sometimes the same part of the process. Again a different ACC risk.

Amongst this plumbing, drain laying and electricians have been in to get their stuff in amongst the foundations and concrete floors. Again all different ACC classifications.

Then the builder comes in and erects the frame, the roofers put the roof on, the cladding, windows, doors and insulation go in. The walls are gibbed. Electrical, plumbing is added throughout this. Walls are painted, plastered and/or tiled. Floors go down, bathrooms and kitchens are finished. All of these trades have different classifications.

You get the idea, there is a lot involved and they have differing risks.

Add to this there are the project management, administration and other support services to enable all of the trades to do their job. Which all come with levy classifications.

The Situation

In this case the building company the client has the contract with sub contracted everything, so having an ACC levy classification of house construction wasn't reflective of the risk at all. The building company did not actually do any work other than the sales/marketing and contracts part of the job. Before you get concerned, many building companies work this way.

So with the main company and a secondary company (for shareholding reasons) which also only handled contracts, we restructured the ACC classifications accordingly.

With a third company providing project management services, we applied a minor change, as this company was on the wrong classification. Management services might be close but not correct, if we wanted the gains we also had to take the losses too. This increased the levies by $0.03 per $100 of profit. About $6 per annum in reality, so getting it right was not costly.

The remaining companies that actually do the building work were on the right classifications, as they built houses.

By taking the time to assess this correctly, packaging it up as a group review, rather than individual companies, we were successful in achieving the successful outcome we got very quickly.

Because we bundled everything together, when it came to ACC assessing our request they had all of the relevant information available to them to make a decision there and then. There was no back and forwards, questions for clarification and how things work.

ACC have the same tools available that we have, ability to search the companies office. So creatively leaving things out does not get you very far, the first thing ACC does with the assessment is look at who is involved where.

By maintaining good working relationships with key staff at ACC, we enable a level of access and trust that ensures we can get assistance with the more unusual situations. What we don't do is use these avenues for the run of the mill work, ACC's business service centre gets this work done quickly and efficiently without having to pull in extra resources.

Action you can take

If you have been in business for sometime, you may have changed your activities and a review of your ACC classification may be needed.

Another client had been doing furniture and interior installation, now they are doing full residential renovations. This is an increased risk and needed review too. Yes, in this case the base levy is more expensive, but with the application of the right levy with Cover Plus Extra and income protection insurance, we've minimised the cost impact of this change for the client and improved their overall disability protection too. More importantly, we have mitigated a large ACC bill, if the client was to face an ACC claim and ACC retrospectively invoiced the levies at the point of claim, at a time when cash flow would be compromised.

If you are unsure about being on the right ACC classification for your occupation, or you are concerned about receiving sufficient support in a disability, accident or non-accident, then you need to give us a call.

If we're doing your insurance work we're a free service to you, if it's just ACC we are looking at, then our nominal fee, $500 + GST, relative to the future savings we can unlock are worth the review. Our building client above, at $8,500 savings so far, certainly thinks so.