Associate Social Development Minister Chester Borrows says ministry staff will determine whether any of the thousands of people found this year to be wrongly receiving a benefit should be prosecuted.
Targeted information-sharing between Inland Revenue and the Ministry of Social Development has uncovered just over 3100 cases of people illegitimately receiving a benefit.
The new information-sharing, which started at the beginning of this year, identifies beneficiaries whose taxable income did not match what they had declared to the ministry.
Ministry staff then review each case, and where people were earning enough income to disqualify them from a benefit, the benefit is stopped.
Under the system, 3139 cases were identified, including 1948 people who were wrongly getting the unemployment benefit and 559 illegitimately on the sickness benefit. The value of the benefits that have now been stopped is about $33.7 million.
Chester Borrows said on Thursday if the ministry is to prosecute, it has to prove that there was intent to wrongfully claim a benefit.
"You have to get over the threshold of being able to prove it beyond reasonable doubt. So it can't be something that is just a mistake or an error - there has to be a guilty intent to actually defraud the taxpayer before a prosecution can take place and we have to be able to prove that."
Mr Borrows says the ministry will also look to recover all overpaid money, including by deducting it from wages.
Care needed - Labour
The Labour Party said care must be taken to differentiate between fraud and genuine mistake. Social development spokesperson Jacinda Adern said anyone defrauding the system should face the consequences, but not all cases would be straightforward fraud.
"Of course anyone who receives the benefit when they're not entitled to that benefit is ultimately taking money away from those who need it most. The question is whether or not what the minister's released today is straightforward fraud or whether or not it's actually demonstrating issues with inefficiencies in our system."
New Zealand First's welfare spokesperson Asenati Lole-Taylor welcomed the crackdown on double-dippers, but questioned why specific data matching for benefit fraud hadn't been used more effectively in the past.
"My main concern is that this is something that should have happened quite a long time ago, because every New Zealander should only be able to have one IRD number. And that one IRD number should have been a key to ensuring that people are not necessarily earning more than they should or not being charged the right rate."