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ACC on Rental Properties

ACC bills can be exorbitant so it's important to ensure you're not paying more than you need to, especially as the Accident Compensation Corporation seem to send out the bills as soon as they can without necessarily checking whether they're overcharging you!

One area that does cause confusion is income from rental properties?  You may be wondering about why and whether ACC collects levies from rental income.  It comes down to whether your rental income is classified as 'active' or 'passive'.  ACC levies active rental income but not passive rental income.

The difference?  Rental income is classified as active when you put in some effort for it.  For example, that might be mental and/or physical work collecting rents, inspecting the property, arranging for maintenance, finding tenants and so on.  Where there's not this degree of effort - for instance, where you have a property manager in place - the income is classified as passive. Isn't that a strange distinction?

If you're running the rental property through a company, and distribute the income as shareholder salary, this would also be levied as active income.  Where income from 'passive' rental has been distributed to the shareholder as dividends, these are not subjected to ACC levies.

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail me at nick@abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice. 


Disclaimer
Important: This is not advice. Readers should not act solely on the basis of the material contained in this fact sheet which consists of general comments only and do not constitute or convey advice per se. Changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. We believe the contents to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents.

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