Newly released documents show the scramble to try to stop the cost of living payment going to people living overseas and that more than 6000 people got the first payment from Inland Revenue (IRD) despite having overseas mailing addresses.
The temporary payment of $350 paid out over three months was the centrepiece of Labour's 2022 Budget, aimed at showing it was addressing the cost of living pressure.
It was to go to all those on incomes of less than $70,000, but the Government was left red-faced after the first payment went to people living overseas – both New Zealanders and migrants who had since moved to another country.
The documents released to the National Party showed IRD said early on it could not do much to stop the payment going to those who had not changed their physical address to an overseas address and were still getting some income in NZ.
And they showed that 6625 people got the first payment despite having an overseas mailing address with IRD because they had a physical address in NZ and IRD could not check where they were living.
National's finance spokeswoman Nicola Willis said the documents showed the design and delivery of the payment was "sloppy" and there was no data checking to ensure people's addresses were up to date.
"Fortunately, the Auditor-General stepped in to ensure the Government tightened up the payment for the second round. The question for ministers now is: just how many ineligible people received the first payment and at what cost?"
Inland Revenue still does not know how many people received the payment who should not have, but after the first payment – and a reprimand from the Auditor-General about the need for greater care - further steps were taken to try to cut down on payments to those who were ineligible.
The documents showed that after the controversy of the first payment, there was a lot of discussion about how to fix it in time for the second payment a month later.
Options raised included excluding about 49,300 people who were on interest-only income, indicating they were not working here. However, working out which were in New Zealand and overseas was difficult and officials were concerned it would exclude the likes of at-home parents in New Zealand from getting it legitimately.
The papers – including messages between IRD staff working on the scheme – show tax agents raised questions with IRD in early June about the possibility their overseas clients would get it – such as those getting interest and PIE income here who still had a local address on the department's files.
The reply was that they would get it, while little could be done about it if they were listed as a New Zealand tax resident and had a local address and bank account.
Despite this, in late July when the first media inquiries landed after emails were sent to notify people they were getting the payment, IRD's communications team were not prepared. An email from one said, "the overseas recipients thing has caught us off guard."
On August 1 – the date the first payment went on – a chat meeting was held to try to work out the scale of the problem and how it could be avoided.
There were questions about 35,000 people who had invalid addresses, and whether they were overseas – and cross-checking people with overseas mailing addresses but who had New Zealand physical addresses.
Another conversation was about those "gaming the system" - including somebody in Australia who changed his address to a New Zealand address to try to get the payment. His partner still had a New Zealand address and had received it.
The officials said they would have to treat those who changed their address on trust – adding it would hopefully be a small minority "that attempt to game the system".
The papers also show the PM's office checked at one point whether it was possible for IRD to take money out of people's bank accounts. The response was that it was possible in some circumstances such as debt recovery. However, IRD told the PM's office it would only pursue the payments if there was evidence of fraud or misleading information.
Prime Minister Jacinda Ardern has repeatedly defended the payment, saying those it is helping far outnumber the small number who got it who should not have.
Willis said it was clear Labour had rushed the payment through, ignoring the warnings from officials about the difficulties in it.
A March briefing shows IRD warned that it was already struggling to service its "business as usual" activities because of Covid-19 payments, and the impact of creating a new payment would be "very high" and "create further and significant operational risk".
The last of the three payments will go out on October 1.
In the cover note, IRD said the design and delivery of the scheme took place over four to five months. Before each payment, they checked the country people listed for tax purposes, whether they had a New Zealand bank account, and whether an income tax assessment included income earned in New Zealand and a local address.