More than 12,000 ineligible people, including a number who are dead, received the first cost of living payment due "coding and administrative" errors, a new document reveals.
That's on top of nearly 108,000 payments - equal to $12.6m - going to people who were potentially overseas, despite the cost of living payment intended only for individuals present in New Zealand.
However, the vast majority of recipients were eligible for the payment. There have been 3.89m payments going to people the Government intended to benefit from the initiative, with 227,770 ready to be sent out when Inland Revenue (IR) receives further customers' bank accounts. That's a total of $474.8m in payments going to the right place.
IR on Friday released a number of documents relating to the cost of living payment; the $350 payment split over three months intended by the Government to support low and middle-income New Zealanders amid rising inflation. There were strict eligibility criteria, including that someone earns $70,000 or less, is aged 18 or over, and is in Aotearoa.
A briefing given to Revenue Minister David Parker on Wednesday shows of the roughly 1.4m payments made on August 1, 12,043 went to ineligible people in error, equal to $1.41m.
"After payment one we identified three Inland Revenue coding and administrative issues that resulted in ineligible people receiving the payment," the document said. "We corrected these errors and the individuals did not receive payment two".
Some of those who received the payment in error are dead.
"This was due to administrative errors," IR told Parker in October. "The indicator on the account that identifies them as deceased (and prevents a number of actions from being taken) has been removed to allow required account activity, such as the processing of final tax returns to be completed."
Once those actions were taken, the indicator the individual was dead was not reapplied, leading them to receive the first payment.
A total of 97 dead people were incorrectly determined as eligible, with 85 eventually being paid.
IR also said that while individuals who only have Portfolio Investment Entity (PIE) income weren't eligible for payments, people whose PIE income "was a loss were not excluded as they should have been".
"This was because of a coding error that only excluded people with only PIE income, if that income was greater than zero," IR said.
There were 11,564 ineligible people in this category who received the payment in error.
While Winter Energy Payment (WEP) recipients also weren't meant to get the payment - something that angered the Green Party - 394 ended up getting it error.
"To identify who is eligible for the WEP we use the employee information by the Ministry of Social Development (MSD) after each benefit or New Zealand Superannuation payment," IR said.
"We identified that a group of people who had been made bankrupt and were on a benefit (and therefore receiving the WEP) were incorrectly selected as eligible for payment one. This was because the MSD file used their pre-bankruptcy IRD number, rather than their current one.
"This meant that the checks did not match the MSD file with their current IRD number."
IR said that the affected individuals are "unlikely to be able to repay" the cost of living payment and it wouldn't attempt to recover the money as Cabinet previously decided to only look to claw back money taken fraudulently. IR would support anyone who contacted it about the payments made in error, it said.
"We will communicate with the customers with only negative PIE income, acknowledging the mistake made in their payment and providing details of how to repay the amount they incorrectly received," it said.
"We will not take any further steps to notify the other customers of this error. We acknowledge that for deceased persons, any notification is a matter of additional sensitivity. We have seen very low numbers of contacts from affected customers enquiring why they did not receive the second payment, indicating no blanket reassurance is required for all customers."
After the cost of living payment was first announced at the May Budget, Finance Minister Grant Robertson was asked on AM why New Zealanders had to wait until August to receive the money.
He said it was to allow IR the time to set up its systems properly.
"It is a big deal and Inland Revenue's never really done a payment like this before, so they've got to set up the systems to do it."
Money going overeseas
When the first payment was made in August, it quickly emerged that many foreigners overseas and expat New Zealanders had received the payment despite it only intended for people in New Zealand.
While some numbers and percentages were bandied about, it wasn't clear at the time how many people overseas got the money.
According to the October 5 briefing, $12.58m went to people possibly offshore - 75,066 first payments and 31,801 second payments.
IR said those numbers could fall if the customers confirm they were in fact in New Zealand or if Customs data shows they were here. About 1200 people who were detected as being overseas have since confirmed their presence in New Zealand. Some of those identified as being overseas may also have contributed to the 1020 payments that have been repaid.
IR said in August that an ineligible person overseas could potentially get the first payment if they hadn't informed the department they had left the country or if they had received income into a New Zealand bank account from the likes of bank interest.
The Auditor-General looked into the matter and released a scathing letter criticising the Government for prioritising getting the payment out the door quickly over accuracy.
However, Parker stood by the scheme by saying the only alternative to an automated payment would be a costly, time-consuming application process which some might not take advantage of.
The documents show an application-based process could have cost $30m, compared to the $14m the "push" payment approach IR went with cost. The additional costs would have been for manual processing of up to 40 percent of applications and administrative costs of communicating to New Zealanders the need to apply.
Issues with the first payment going to people overseas prompted IR to introduce a number of new screening checks. They included looking for where an overseas IP address has been used to log into Inland Revenue's website, or where a non-resident individual income tax return has been filed for the last financial year.
Parker defends policy
Overall, $488.8m has been spent on payments, including for eligible people, ineligible people and those possibly overseas. That includes 4.07m payments that have already been sent out to eligible people or will when IR receives their bank account details.
In a statement on Friday, Parker said the payment had helped provide support to low and middle-income New Zealanders and soften the blow of inflation. He said more payments will be sent out as people file their final tax returns.
"While IRD records are good they are not perfect, so a small percentage of payments went to people who, for instance, were overseas but had a New Zealand address in IR's data sets," he said.
"The only alternative - requiring people to apply - would have taken much longer, cost far more in wasted administration than would be saved, and seen many eligible people, who did not apply, miss out because of the extra administrative barrier."
Parker said the $12.6m that went to people potentially overseas was less than the extra cost of an application-based process.
"Some of those assessed as potentially overseas will be eligible, so that figure of $12.6 million will drop as some confirm they were in New Zealand and therefore were eligible."
His office also presented a timeline showing the minister raised concerns with IR about reports of payments going to ineligible people on August 1, the day the first payment went out. It also shows the minister raised questions on the same day about potential further screening checks.
The documents released on Friday confirm officials did quickly begin looking into changes to the scheme's automatic payment model after it emerged money was going overseas. A briefing on potential options was presented to ministers on August 12, including to the Prime Minister.
Parker said the new screening tests led to a "significant drop in payments going to ineligible people". The new checks also included information received from Customs prior to the third payment.
