Cost of living payment: New checks to stop money going to foreigners

Inland Revenue (IRD) will make additional checks before paying out the next round of the cost of living payment to avoid money going into the accounts of foreigners.

The monthly $116 payment is meant to only go to New Zealand tax residents and people "present here", but some individuals offshore received the first portion at the start of August.

To stop that from happening again with the second round of the payment on Thursday, the Government has announced it is refining its screening tests. 

That includes 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.

The previous process was completely automatic, but with the new changes Revenue Minister David Parker says some people will now need to confirm they are living in New Zealand. 

"This might apply, for example, to people who have been overseas for more than six months with a student loan, or have filed a non-resident tax return," Parker said.

"Of course, if any of these people have been earning wages in New Zealand recently, or receiving Working for Families, they will still get the payment automatically."

Most people won't need to do anything extra, but if a Kiwi who believes they are eligible doesn't receive the second or third payment, they should contact Inland Revenue. 

"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," said Parker.

"But this is better than running an application process for two million people, which would cost more than it would save. Individuals still need to keep their details up to date."

The additional checks to be made:

  • A non-resident individual income tax return (IR3NR) 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 of greater than $20, and
  • An overseas IP address used to log into myIR (excluding a VPN)

Extra checks providing more certainty someone is in New Zealand will be:

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

The eligibility criteria for the payment - $350 split across three months - haven't changed. Applicants must be a New Zealand tax residents present here, aged over 18, earn $70,000 or less and not be entitled to the Winter Energy Payment.

Many of the people offshore who received the payment had previously worked in New Zealand before department.

IRD said at the time it used 2022 tax assessments to determine who was eligible, but that people get the payment if they received income into a New Zealand bank account from the likes of interest.

"If someone has left the country and hasn't told Inland Revenue they're not living here currently we will have treated them as resident here and they may receive the cost of living payment."

National called for the Auditor-General to launch an independent investigation into the scale of the issue after the Government admitted not knowing how many foreigners the money could have gone to. It was estimated about 21,000 ineligible people could have received it - or $7.35 million.

Parker defended the policy at the time, saying the vast majority of recipients would be in New Zealand and the only alternative would be to have Kiwis individually apply. This would be time-consuming, costly to administer, and lead some people to miss out.

The minister also suggested a number of dead people may have got the payment as "after someone has died, they can't update their details to Inland Revenue".

"What Inland Revenue relies upon is periodic information that comes through from Internal Affairs, which in itself is imperfect but the best that the country has,"he said earlier this month.

Ministers knew in May that ineligible people may receive the cost of living payment. Advice to the Government said some of the information IRD holds "may not be up to date". 

"This would mean some people who should receive the payment may not, and conversely, some people who received the payment should not have," it said.

The May advice, also from Treasury, "recommended against" the policy. It said it was a "broad-based" payment that was a "poor mechanism for supporting households with a longer-term problem". It could also add to inflation in the short-term.

Advice also said making IRD administer the payment would "compromise" the department's "already stretched workforce" and have "critical operational impacts". It was suggested up to 750 full-time staff may be needed over the three months.