A law change has led to a doubling in the amount of forgotten money being held by the government
The amount of unclaimed money held by the Crown more than doubled to $398 million within just three months – the bulk of it may never be claimed.
The unclaimed money was included in the pre-election financial update released earlier this week, up substantially from the $192m held by Inland Revenue on March 31 this year.
Unclaimed money is typically funds left untouched by its owner in a bank account or trust or unpaid wages and life insurance payouts. Amounts less than $100 can be kept by the holder or paid to charity.
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Banks used to have to hold stale bank accounts for up to 25 years before handing them over to Inland Revenue, but a law change introduced in 2021 drastically shortened that timeframe.
The amendment to the Unclaimed Money Act 1971, introduced by then-Revenue Minister Stuart Nash, made money 'unclaimed' after five years.
An IRD spokesperson said a two-year grace period for the law change ended on May 20, “So when the banks all filed at the end of the grace period, naturally there was a surge.”
In introducing the law change in 2020, Nash said there was an estimated $199m of unclaimed money in the Crown’s accounts in November 2019, with IRD managing to return about $2.4m in the 12 months prior.
The changes were made in part to improve that track record of returning unclaimed money, making it easier for Inland Revenue to track down owners by actively using its systems and records, rather than trying to do so a quarter of a decade down the line.
IRD said the legislation requires the bank holding the unclaimed money to make a reasonable effort to identify and contact the rightful owner, with IRD acting as a place of last resort.
Inland Revenue’s role is to administer the Unclaimed Money Act, not to proactively seek out potential owners. Owners can apply to receive their unclaimed money through IRD.
It’s yet to be seen how effective this shorter timeframe will be at getting money to the right people. No interest is earned on unclaimed money and it is held as a liability on the government books.
No claims can be made on money that has been unclaimed for more than 25 years.
There has been an international move to use unclaimed money for charitable purposes, including funding scholarships and other social impact activities.
Charities Law Reform has advocated for this on New Zealand shores, saying that invested right, unclaimed money could be invested in charities addressing social and environmental issues.
