Cost-of-living payment to go through further screening

The government is bringing in extra checks to stop its cost-of-living payments going to people based overseas.

Eligibility criteria remain the same, but the changes will mean some eligible people having to confirm they are based in New Zealand.

With the second $116 payment expected to be made from Thursday, Revenue Minister David Parker announced the changes this afternoon.

He said Inland Revenue (IRD) had found about 31,000 of the 1.4 million people who received the first payment had been flagged as possibly being overseas, and would have to provide further information to before receiving further payments.

The further screening tests would ensure, "where we have incomplete information, we reduce the chances the payment reaches those who don't meet the criteria", he said.

"Someone that might have a student loan that records them as being overseas, we will now make the assumption that they are overseas. They won't always be, because in respect for example of that student loan data people are not recorded as being in New Zealand until they've been back for more than six months."

It would include checking data that suggests people may be overseas against other data suggesting they are in New Zealand.

Information prompting additional checks:

• Non-resident individual income tax return filed for the 2021-22 tax year
• A part-year tax return for the 2021-22 tax year, with situation "departing New Zealand"
• A student loan borrower with overseas-based borrower status and a student loan balance above $20
• An overseas IP address used to log into myIR (excluding a VPN)

Information providing more certainty someone is in New Zealand:

• Receiving employment income in the last two months
• Being registered as a principal caregiver or partner for Working for Families tax credits
• Logging on to myIR with a New Zealand IP address (excluding VPN)

Parker said the changes would not be applied to payments already sent out, just to those yet to be made.

"The people who've received it once, unless they've done it fraudulently, they've done nothing wrong. We think that we have got some better data sets to scrub the data that we've already got."

The payments - $350 spread over three instalments - were initially designed to be made by IRD assessing eligibility based on tax information without requiring people to apply for them, to reduce the cost of administration and ensure the payment reached those who needed it.

To be eligible, people must be based in New Zealand, aged over 18, and earned less than $70,000 in the 2021-22 tax year. People in prison or who already receive the winter energy payment were ineligible.

However, the government was heavily criticised after the broad, automated approach meant many ineligible people overseas reported receiving the first of the payments in error.

Parker said most New Zealanders would not need to do anything to receive the second or third payments, and should contact IRD if they had received it in error or believed they should receive it and had not.

"We expect the changes will help ensure only those eligible get the payment. I acknowledge that they will not achieve perfection because IR's data can never be perfect. But this is better than running an application process for two million people, which would cost more than it would save," he said.

Auditor-General criticises 'stewardship of public money'

National Party finance spokesperson Nicola Willis wrote to the auditor-general raising concerns after the initial payment was made, calling for an investigation.

In response, Auditor-General John Ryan confirmed he had sent letters to Willis and Commissioner of Inland Revenue, Peter Mersi, saying payments made to ineligible people did not constitute unappropriated expenditure, but "in our view, good stewardship of public money required greater care when designing and implementing" the payment.

"Inland Revenue should now consider what steps it can take to identify how many ineligible people have already received payments," he said.

"I encourage Inland Revenue to also focus on future payment tranches to ensure that payments are reaching only the people the government intended them to go to. I also encourage Inland Revenue to remind ineligible recipients that they are obliged to repay any payment received immediately."

Willis described the auditor-general's investigation as "damning".

"The auditor-general makes a good point, but one that should have been obvious to any responsible government, in suggesting changes be made to future payments to 'ensure that the payments are reaching only the people the government intended the payment go to'."

It was clear his investigation had forced the government into making the changes, she said.

"It's shocking that it took a stern word from the auditor-general for the government to take taxpayers' money seriously."

In a statement, ACT leader David Seymour questioned why the checks were not included for the first payment, saying it was either that the government forgot or "did not care and wanted as little resistance to giving out money as possible".

"Of course, the rushed law could have been avoided if only the government had taken a much simpler approach. Just reduce the amount of tax taken in the first place," he said.

Parker said that if they were to go back and do it again the government would have used the additional screening from the start, but he stuck by the general approach.

"There were two choices here - you run an application process that is absolutely thorough, or you run it based on data sets. If we'd run an application process it would have cost more money than it saved ... and it would have taken many months to process the millions of people that needed to be processed."

"Had we run an application process, people wouldn't have got the cost of living payment when the pressures are high from the spike in inflation that we've seen."