Photo Source: Rathaphon Nanthapreecha
New Zealand’s government is set to raise the ACC levies for electric vehicle owners next year, a decision aimed at easing the financial burden on the struggling injury insurance system as costs continue to surge.
Changes to EV and Petrol Vehicle Levies
Electric vehicle owners in New Zealand will see their ACC levy rise sharply from NZD $42.09 (USD $25.70) to NZD $109.05 (USD $66.47) in the next financial year.
The levy will increase further to NZD $122.24 (USD $74.69) by 2027/28, more than double the amount paid by petrol vehicle owners. Petrol vehicle levies will increase more gradually, from NZD $42.09 (USD $25.70) to NZD $49.38 (USD $30.12) in 2024, with additional hikes in subsequent years.
The government’s approval of these levy hikes addresses rising financial pressures, and the difference between EV and petrol levies reflects that electric vehicle owners do not pay petrol taxes that fund ACC. Motorcycle owners will also face higher levies, with the 500cc levy increasing from NZD $298 (USD $181.72) to NZD $321 (USD $197.80) in 2024, reaching NZD $412 (USD $251.32) by 2027/28.
ACC Faces Growing Financial Strain
The Accident Compensation Corporation (ACC) is facing a $7.2 billion financial deficit for the year ending June 2024, a sharp decline from its $911 million surplus the previous year. ACC Minister Matt Doocey pointed to declining rehabilitation rates, rising service costs, and increasing compensation payouts as the main contributors to the insurer’s financial difficulties.
“These trends impose significant costs on households,” Doocey said. He also revealed plans for an independent review of ACC’s claims management, focusing on improving rehabilitation efficiency.
The average recovery time for claimants has increased, from 70 days in 2023 to 73 days in 2024, with many taking longer to return to work.
Minimal Impact Expected on EV Demand
Experts believe the impact of the recent levy hike on electric vehicle uptake will be minimal. Miles Workman, senior economist at ANZ, noted that exchange rates, shipping costs, and interest rates are far more significant factors influencing the total cost of EV ownership.
Many buyers, he explained, are also motivated by environmental concerns. Brad Olsen, principal economist at Infometrics, pointed out that the levy remains a minor part of the overall cost of purchasing an EV, even with the increase.
He views the hike as part of a strategy to phase out incentives as EVs become more mainstream. “It could have a very marginal impact on use and uptake of the vehicles but would not be significant,” Olsen said.
Effect on Workers and Businesses
The impact of the levy increases extends beyond just vehicle owners, with earners’ and business levies set to rise by up to 5% annually for the next three years. A median full-time worker earning $70,000 per year will pay an additional $140 annually by 2027.
Challenges for Consumers and the System
The upcoming levy hikes will impact households across different income levels, with EV owners, motorcyclists, and businesses shouldering much of the increase. While the need for cost recovery due to ACC’s financial challenges is acknowledged, critics may question how these changes will affect affordability. At the same time, ACC’s independent review aims to improve efficiency in its claims system and accelerate recovery for claimants.
As Doocey stated, “It will look at whether ACC has the right interventions and settings in place to support accident claimants to return to independence as quickly as possible.”