Understanding ACC and vehicle licensing – why we pay different amounts

The amount you pay for your vehicle licence each year varies for a number of reasons, but the main one is changes in the Accident Compensation Corporation (ACC) levy. The ACC licence levy covers the costs of motor vehicle road accidents. The levy is different for different vehicles based on data that shows the level of risk.

Not all vehicles have the same accident risk

Different classes of vehicles pay different ACC levies according to their relative accident risk. Motorcycles pay more than cars because, according to Ministry of Transport data, a motorcyclist is 16 times more likely to be killed or seriously injured in a crash than a car driver over the same distance.

Similarly, utes and vans (classed as goods and service vehicles), along with taxis and rental vehicles, pay more than private cars to reflect their higher mileage and therefore higher accident risk, and in the case of utes and vans their higher accident claim cost and poorer safety design features.

Passenger cars under 40 years of age now also pay different levies according to their injury risk rating. ACC says this recognises that not all cars provide their occupants and other road users with the same level of protection when they are in a crash.

Petrol and diesel vehicles pay ACC in different ways

Petrol vehicles pay a lower annual licence fee than diesel vehicles because a portion of the ACC levy is added to the cost of petrol at the pump. For diesels, the entire ACC levy is paid in one lump sum as part of the annual licence fee. This is because diesel fuel is also used off-road – e.g. for tractors, boats and machinery. Off-road accidents are covered by other ACC levies, such as employer or earners’ levies. 

Although the ACC levy is collected in different ways for petrol and diesel vehicles, the net amount is calculated to be the same. For example, under the 2016/17 licence fees, a petrol car with the poorest risk rating costs about $149 to re-licence, of which $80 is the ACC levy. If they travel an average annual mileage, the owner will pay another $65 through the ACC levy on petrol, bringing the total ACC levy to $145 per annum. Meanwhile, the equivalent diesel car costs $229 to re-licence, of which $150 is the ACC levy – virtually the same amount.

Petrol tax is also another reason why the motorcycle licence fee is higher than a car, because motorcycles use less fuel and so contribute less ACC via petrol tax.

Why diesel vehicle owners also pay RUC

Because there is no tax on diesel (except for GST), diesel vehicles also pay a distance-based Road User Charge (RUC) based on vehicle weight. This does not include an ACC component, but is instead equivalent to the petrol excise which goes to the National Land Transport Fund for road building/maintenance and other transport projects.

Overall, diesel vehicles are still cheaper to run because of their superior fuel economy.

Demerits for vehicle licence offences

From 1 May 2011, demerit points were introduced for vehicle registration and licence offences (up to 20 points per offence, in conjunction with lower fines). The demerits only apply to tickets issued by police officers, and anyone ticketed for the first time with an unlicensed car is given a two week grace period to license their vehicle before any penalties apply.

Other changes include NZTA requiring owners who have previously been caught driving a vehicle with its licence on hold to surrender the number plates, or otherwise NZTA could decline their application to put the vehicle licence on hold.

AA speaking up for motorists

The AA supports having an ACC levy on petrol, and favours adding a greater proportion of the levy to petrol because fuel consumption correlates with mileage and is therefore a proxy for risk exposure.

We'd also like to see a similar distance-based ACC charge for diesel vehicles added to their Road User Charge (RUC). At the moment, all diesel vehicles pay the same ACC levy (according to vehicle class) regardless of annual mileage. By adding ACC to RUC, it would lower the annual diesel vehicle licence fee and owners would instead pay more of their ACC related to their mileage which is fairer for those who travel less.

While ACC is a no-fault system, the differential vehicle levies ensure owners contribute the appropriate levy to fund the costs of accidents that occur while travelling in these vehicles, thereby reducing the level of cross-subsidisation within the ACC motor vehicle account. As car designs become safer, this will improve road safety and should be reflected in the ACC levy we pay.

The use of demerits for vehicle licence offences is intended to ensure every owner of a motor vehicle being used on the road is paying their fair share of ACC levies. It’s unfair to the majority of vehicle owners when a minority deliberately drive an unlicensed vehicle, or put their vehicle license on hold while continuing to drive it, as a way of avoiding payment.

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