Trouble with Work and Income: Penalties, investigations and overpayments

Penalties (“Sanctions”)

What is a “sanction”?

A “sanction” is where Work and Income reduces or cancels your main benefit because it believes you haven’t complied with your obligations, such as work-test requirements or your “social obligations” as a parent.

What penalties (sanctions) can be imposed?

Social Security Act 1964, s 117

This will depend on whether you’ve been sanctioned before, and if so, how many times:

  • First sanction – The first time, your main benefit will be cut by 50 percent until you meet your obligations (“re-comply”). If you haven’t re-complied within four weeks after your benefit was cut, it will be cut entirely until you do re-comply.
  • Second sanction – If you’re sanctioned a second time (after you re-complied following a first sanction), your main benefit will be suspended entirely (cut by 100 percent) until you re-comply.
  • Third sanction – If you’re sanctioned a third time (after you re-complied following a second sanction), your main benefit will be cancelled and you’ll need to re-apply for the benefit. You won’t be able to re-apply until 13 weeks after the cancellation, and when you re-apply you’ll face tougher eligibility criteria than when you were originally granted the benefit.

If you’re a teenager getting the Youth Payment or the Young Parent Payment, there are some specific penalties if you don’t meet your obligations: see “Sanctions (penalties) if you don’t meet your obligations” under “Qualifying for the Youth Payment”, and see “Sanctions (penalties) if you don’t meet your obligations” under “Teenage parents (Young Parent Payment”).

The process that Work and Income must follow

Social Security Act 1964, ss 113, 114

Work and Income must follow a set process when imposing sanctions. This includes:

  • notifying you in writing, at least five working days before they take the particular action
  • if it’s your first or second sanction, giving you the opportunity to meet your obligations (“re-comply”) before they impose the sanction on you.

Outstanding arrest warrants: Power to cut benefits

Social Security Act 1964, s 75B

Work and Income also has the power to stop your benefit if you have an outstanding arrest warrant. There are two ways this can happen, depending on whether the police see you as a public risk:

  • No public risk – If a warrant for your arrest is still outstanding 28 days after it was issued, Work and Income will be informed and it will then notify you, giving you 10 working days to resolve the situation (for example, if you’re not in fact the person named in the warrant) or else your benefit will be stopped.
  • Risk to public safety – If the police tell Work and Income that they believe you are a risk to public safety, Work and Income can stop your benefit immediately, without having to notify you in advance. The police officer who signs the written request to Work and Income must be at the level of inspector or higher.

If you have a dependent child, however, your benefit will only be cut by half, not stopped completely.

Being accused of benefit fraud: Work and Income investigations

When Work and Income might begin an investigation

Through its Fraud Investigations teams, Work and Income investigates information or accusations that beneficiaries may have received income support that they’re not entitled to.

The two most common areas that are investigated are undeclared income and relationship status.

An investigation might begin after information-sharing between Work and Income and the Inland Revenue Department has shown that a beneficiary hasn’t declared income to Work and Income (see below, “Information-matching between government agencies”). Work and Income may also randomly select cases for investigation, or it may simply have a suspicion that a beneficiary is not in fact entitled to what they are receiving.

What is relationship debt sharing?

Social Security Act 1964, ss 86AA, 127A

Historically, if a Work and Income client was found to have dishonestly claimed a single benefit while in a relationship, that client was solely responsible for paying back the fraud debt. From 7 July 2014, a new “relationship debt sharing” law allows Work and Income to investigate and prosecute both the client and their partner for benefit fraud. This applies to all debt where an investigation clearly shows that the partner has knowingly benefitted from benefit fraud.

Note: The debt shared between you and your partner is debt from when you’re together as a couple. If you split up, the debt remains shared until it’s paid in full. Any debt you have stays with you and your partner until it’s paid off.

The investigation process

Social Security Act 1964, s 11

Work and Income has very specific protocols (rules) for its investigations. This includes explaining to you at the beginning of any interview that anything you say can be used as evidence against you, that you have the right to remain silent, and that you can stop the interview at any time.

The investigation unit must initiate the investigation in writing, giving you at least five working days’ written notice (sometimes referred to as a “Section 11 letter”) so that you have time to provide them with the information they’re seeking. This information can include:

  • bank records
  • employment details
  • copies of any contracts – for example, with phone and power companies
  • tenancy agreements
  • school enrolment records, and
  • a variety of other forms of evidence about your circumstances.

    Note: If Work and Income sends you a section 11 letter telling you it’s beginning an investigation, you should get advice and assistance immediately from a benefit-rights group or Community Law Centre (see “Other resources” at the end of this chapter).

Information-matching between government agencies

Social Security Act 1964, ss 126A, 126AB, 126AC; Privacy Act 1993, Part 10, Schedule 3

Work and Income (as part of the Ministry of Social Development) regularly exchanges information about beneficiaries with other government agencies under a range of “information-matching” agreements with those other agencies.

Work and Income obtains information under the following agreements:

  • Inland Revenue (tax information) – Work and Income regularly receives tax details from Inland Revenue so that it can check whether a beneficiary has been in paid employment and whether they have declared the relevant income to Work and Income. If you haven’t declared income, Work and Income will probably notify you that you’ve been overpaid. There are specific rules as to how soon Work and Income must take action in these cases (see below, “Overpayments: When you’re paid too much by mistake”).
  • Customs (departures from NZ) – Through information provided by the New Zealand Customs Service, Work and Income can find out when a beneficiary leaves New Zealand. Beneficiaries on work-tested benefits are not entitled to the benefit while absent from New Zealand. However, absences are permitted on compassionate grounds or if the absence is required for medical reasons. People receiving New Zealand Superannuation can be absent for six months before their income support stops (see “You’re 65 or older” under “Types of benefits”).
  • Ministry of Justice (prison terms) – Your income support will usually stop if you’re serving a prison sentence or are being held in prison on “remand” (waiting for the next step in your case). The Ministry of Justice provides Work and Income with this information. Work and Income has the discretion to continue income support in some cases.

Other information-matching agreements provide for Work and Income to give information about beneficiaries to other government agencies – for example Work and Income passes on beneficiaries’ addresses and phone numbers to the Ministry of Justice if they have unpaid fines.

Overpayments: When you’re paid too much by mistake

What will happen if Work and Income have overpaid me?

Social Security Act 1964, ss 85A, 85B, 86

If Work and Income believes it has overpaid your income support, you will have to come to some repayment arrangement, unless you disagree that there’s been an overpayment and you dispute this with Work and Income (see below, “Challenging an overpayment decision”).

An overpayment may have occurred because, for example:

  • Work and Income did not properly abate (reduce) your benefit after you earned other income, or
  • you were not in fact entitled to the assistance you received.

    Note: If Work and Income writes to you telling you that you’ve been overpaid, you should contact a benefit-rights organisation (for information see “Other resources” in this chapter).

Challenging an overpayment decision

If you disagree with a Work and Income decision that you’ve been overpaid, you can apply for a review by a Benefit Review Committee (see “Challenging Work and Income decisions: Reviews and appeals” in this chapter).

An overpayment decision might be incorrect because, for example:

  • Work and Income made a mistake in calculating the amount of the overpayment
  • you were in fact entitled to the payments, or
  • Work and Income ignored information you gave them about your income or a change in your situation.

Asking for an overpayment to be written off

Social Security Act 1964, ss 86(1), (9A), (9B)

Work and Income cannot recover an overpayment from you if:

  • it was caused by a mistake on its part, and
  • you didn’t contribute to the mistake, and
  • you received the payment in good faith and changed your position (for example, you bought something) believing that you were entitled to the money and wouldn’t have to pay it back, and
  • it would be unfair (“inequitable”) to expect you to pay it back.

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