Unclaimed Money Act 1971

The Unclaimed Money Act 1971 sets rules for money in New Zealand that is owed to someone but has sat untouched long enough to become unclaimed money. If your business is a covered holder and the legal test is met, you may need to try to find the owner, gather the required information, and pay the money to the Commissioner of Inland Revenue.

For small businesses, the common risk area is dormant balances rather than day-to-day trading income. Think old customer deposits, trust account balances, money held on behalf of clients, or amounts left owing after a business relationship has gone quiet. The Act also deals with some situations where a business stops trading while still holding money owed to others.

The Act applies to a defined list of holders. That list includes New Zealand companies, overseas companies carrying on business in New Zealand, banks, building societies, businesses borrowing and lending money in New Zealand in respect of money borrowed, insurance businesses, auctioneers, real estate agents holding trust money, conveyancing practitioners holding trust money, sharebrokers, qualified statutory accountants holding client money, and motor vehicle traders holding money as agent.

The Act also allows some other persons, firms, bodies or institutions to choose to be treated as a holder for money they hold or owe, if the statutory conditions are met. On the other hand, certain public sector bodies are excluded from being holders under the Act. Coverage matters because the reporting and payment duties sit with the holder.

Money is not unclaimed just because it is old. The Act sets a specific test. Broadly, the money must be held in New Zealand, payable by a holder to the person entitled to it, and meet one of the statutory pathways. A common pathway is where the amount payable to an individual owner is more than $100 and the owner has had no relevant interaction for 5 years.

The Act distinguishes between single-term arrangements and renewing-term arrangements. For a single-term arrangement, the 5-year period looks at whether the owner requested information from, or provided instructions or information to, the holder during that period. For a renewing-term arrangement, the timing runs from after the end of the first fixed period and ends with the end of the second or a later fixed period.

There is also a pathway where the holder chooses to pay the money to the Commissioner as unclaimed money and satisfies the requirements in section 5B. Another pathway applies where a holder ceases business, or dies, and still holds money arising from the business after 6 months, provided the statutory conditions are met.

The Act is broad enough to catch money payable under an arrangement where the holder receives money from the owner in return for providing money later, certain matured life assurance payments, and obligations to make payment that arise under law or equity. That means the source of the obligation matters. You should look at the agreement, account terms, trust arrangement, or other legal basis for the payment.

But the Act also excludes some categories. Money payable as a dividend by a company to a shareholder is excluded, unless the payment is made by a mutual association in relation to money deposited with the holder by the owner as a member. Money payable as a rebate by a mutual association to a member in relation to trading transactions is also excluded, unless it relates to money deposited with the holder by the owner. Benefits from a pension fund or superannuation fund are excluded.

These exclusions are important because businesses often assume every stale amount must be remitted. That is not the rule. You need to classify the amount correctly before deciding whether the Act applies.

If you are a holder, the Act imposes two practical duties before or when you remit money. First, you must make reasonable efforts to locate the owner of money that is, or will soon become, unclaimed money and to communicate with the owner about it. The Act does not spell out a fixed script, so your process should be sensible, documented and matched to the information you already hold.

Second, if you pay the money to the Commissioner as unclaimed money, you must provide the required information in a form acceptable to the Commissioner. The information must be in your possession or control and readily available. The Act specifically lists the source and history of the amount, the owner’s full name, date of birth and tax file number, address and contact details, whereabouts, the source of the owner’s entitlement, and where relevant account details including the date of the owner’s last interaction.

These duties mean record quality matters. If your customer records are incomplete, your compliance task becomes harder and the owner may be harder to identify later.

If money becomes unclaimed money under section 4(2) for a holder in a reporting period, the holder must, within 1 month and 20 days from the end of that reporting period, meet the section 5B requirements and pay the money to the Commissioner. For many holders, the reporting period is a quarter ending on the last day of March, June, September or December.

The Commissioner can approve a 6-monthly reporting period made up of 2 consecutive quarters. The Act also allowed a transitional first reporting period of a different approved length after the 2021 reforms, but the main practical point for current businesses is to know which reporting cycle applies to them and diarise the deadline from the end of that period.

If you pay qualifying unclaimed money to the Commissioner in accordance with the Act, you are relieved of further liability to any claimant for that money. If you do not comply, the Commissioner can recover money payable as a debt due to the Crown, and the offence provision may also be relevant.

The Commissioner or an authorised Inland Revenue officer may examine records and accounts relating to money that is or may be unclaimed money. They may require production of books, vouchers or documents, inspect and copy books and documents, and require written information or production of books or documents that are in a person’s knowledge, possession or control and relate to money that is or may be unclaimed money.

For a small business, this means unclaimed money compliance should not sit only in someone’s memory. You should be able to show how the balance arose, why it is still held, what owner details you have, what contact attempts were made, and why you concluded the amount was or was not reportable. This is especially important where your business holds client money, trust money, or money in multiple capacities.

The offence provision applies where a holder wilfully or negligently fails to comply with section 8(1) or section 10, or with a condition of an exemption under section 9. It can also apply to directors, managers, secretaries or other officers who authorise or permit that failure.

After money is paid to the Commissioner, a claimant can make a demand to the Commissioner. If the Commissioner is satisfied the claimant is the owner, payment may be made from a Crown Bank Account. The Act also says no claimant is entitled to interest on the amount claimed or paid under this process.

The Commissioner may remove an amount from the list of amounts available for the owner to claim if the money has been unclaimed for 20 years or more, the Commissioner holds no information relating to the owner, and the amount is $100 or less. Once removed, the amount ceases to be unclaimed money, and the Act limits rights of action against the Commissioner in relation to delisted amounts and certain investment or non-investment decisions.

The Commissioner may also make a special arrangement exempting a holder or class of holder from compliance with all or part of section 8(1), absolutely or conditionally, or for specified kinds of unclaimed money. That does not remove the underlying liability to pay unclaimed money to the Crown.