The government is defending the administration of its $350 cost of living payment after New Zealanders who have lived overseas for years discovered they are eligible for the bonus.

The National Party has accused Labour of spraying taxpayers' cash around the world to undeserving expats, but the government insists the scheme is not a waste of money and very few people will receive the payment in error.

Inland Revenue says it will not pursue people who wrongly received the money - a Budget promise to help households offset the impact of soaring inflation - unless they have provided fraudulent or misleading information.

The first of three $116 installments is due to be automatically deposited into the bank accounts of more than two million people today.

The money is supposed to go to New Zealand tax residents over the age of 18 living in the country, who earn up to $70,000 last financial year and are not entitled to the winter energy payment.

Kiwis living overseas have received letters from Inland Revenue saying they qualify for the cost of living bonus, even though they are not New Zealand tax residents.

Working holidaymakers, students and other short-term visa holders who have moved home have also reported on social media getting the email.

"IRD emailed me saying they are going to give me money. Great! The only problem is that I don't actually live in New Zealand and haven't stepped foot in the country in more than two years," one person wrote.

"Now, as a foreigner, I don't want to tell you how to run your country but I'd suggest perhaps Kiwi taxpayers dollars should be going into Kiwi pockets?"

New Zealand expats in the United Kingdom also expressed their surprise online at qualifying for the payment, some of whom planned to opt out.

"There must be an issue with their algorithm to determine who gets the payment because I've been in London for 4 years now," one says.

Revenue Minister David Parker estimates fewer than one in 100 people will receive the payment in error.

He says it will have been more expensive to manually check the eligibility of every person rather than distribute the cash through an automated system.

"This is not a waste of money," he says.

"We always knew that some people would be getting this payment at the margins who wouldn't be eligible, but we know that it's a very, very small number and the alternative was more expensive than the money that would be saved."

Parker concedes the government might never know how many people will receive the payment without meeting the proper criteria.

"You don't know what you don't know, so we'll never have a completely accurate figure," he says.

National Party finance spokesperson Nicola Willis says New Zealanders will be shocked to learn people overseas are getting taxpayer-funded cash handouts.

"A lot of New Zealanders will feel very frustrated that money they've worked hard to earn and paid in tax is going to end up in the back pockets of people living in Sydney and London who frankly have done nothing to deserve that cash," she says.

The second instalment is due to be paid on September 1 and the third on October 3.

Government ministers were warned in May that some of the information Inland Revenue held will not be up to date.

"This would mean some people who should receive the payment may not, and conversely, some people who received the payment should not have," says a regulatory impact statement.

An Inland Revenue spokesperson says eligibility for the cost of living payment will be based on information it held at the time each instalment is due.

"It is possible that, for a number of technical reasons, there will be people who didn't expect to get the cost of living payment, who are eligible to receive the first of the three payments," the spokesperson says.

Inland Revenue is using a variety of information, including addresses, bank accounts and tax residency status to determine whether a person is residing in New Zealand, they say.

People must have had a 2022 tax assessment with eligible income such as salary and wages or bank interest.

"If someone has left the country and hasn't told Inland Revenue they're not living here currently we will have treated them as resident here and they may receive the cost of living payment," says the spokesperson.

People who are not in paid work during the last financial year could receive the payment if they have income from bank interest, or people who received Working for Families payments.

Inland Revenue says it will only try to recover payments when someone has provided "fraudulent or willfully misleading information".

-RNZ/Jean Edwards.