The government doesn't know exactly how many ineligible people have received the cost of living payment.

The first of three $116 instalments was paid yesterday to New Zealand tax residents who earn up to $70,000.

But some New Zealanders and former residents living overseas have also reported receiving the first payment, despite not being in the country and therefore not eligible.

Revenue Minister David Parker told RNZ it is estimated about 1 percent of the approximately 2.1 million people who received the payment are not eligible for it. That would mean about $7.35 million had been paid out to 21,000 people

in error.

"We're not sure of the exact number, you don't know what you don't know."

The government knew some people overseas would receive the payment as IRD is using an automated system that cannot easily tell who lives in New Zealand and who does not, Parker said.

"The only alternative was an application process, which both would have cost more than the money saved and would have taken so long."

It was "unfortunate" some people overseas had received the payment, Parker said.

"But it's an unavoidable reality of paying it based on data that's held by Inland Revenue, rather than seeking a lot more data through an application process. So the alternative was worse. It's not perfect, but it's better than the

alternatives."

National's finance spokesperson Nicola Willis said the government should give taxpayers "much better surety the money hasn't gone far and wide around the world to those that are not eligible for it".

She suspected the number of people who had received the payment in error was greater than 1 percent.

"The government needs to do a lot more investigation to provide New Zealanders assurance that their money isn't being wasted in large amounts."

The government is not going to "chase down" ineligible people to get the money back, Parker added.

Willis said that was "disappointing".

"For every dollar that's being wasted in this way, that's $1 that could have been used here in New Zealand, either as tax relief for hardworking Kiwis or frontline services that are stretched," Willis said.

The one-off $350 sweetener was announced as part of the government's $1 billion cost-of-living relief package in Budget 2022.

Warning of payments' impact on IRD operations

Prime Minister Jacinda Ardern said yesterday the payment would help New Zealanders through the "peak of the global inflation storm".

But in May, before the payment was announced, ministers were told by officials high inflation was expected to persist and the one-off payment was a "poor mechanism for supporting households with a longer-term problem".

Advice to ministers also warned the rollout of the payment would have "critical operational impacts" on Inland Revenue and would "compromise" its "already stretched workforce".

The department estimated it would need an extra 750 fulltime staff in the weeks the payments were made and sought extra funding to cover the temporary workforce.

Three hundred existing IRD employees were seconded to help and 400 temporary employees hired, Parker said.

The May advice added there would be an "overall degraded customer service experience" at IRD as it delivered the payment, "leading to increased customer frustration and loss of trust in Inland Revenue's ability to support them".

There would be "some effect on other services, but we don't think that will be dire", Parker said.