All businesses need to be aware of their legal obligations around unclaimed money, because failing to comply with those obligations is an offence.
This article summarises the obligations that the Unclaimed Money Act 1971 (UM Act) imposes on businesses that hold unclaimed money.
WHAT IS UNCLAIMED MONEY?
Unclaimed money is money held by a business or another entity (Holder) in NZ that is left untouched by its rightful owner (Owner) for (generally) 5 years or more (Unclaimed Money). Many businesses are holding Unclaimed Money, such as payments that have been made to the business in error and/or entitlements that have not been paid out or payments that have not been made.
Specific examples of Unclaimed Money include:
- customer overpayments;
- trade/account credits;
- unpaid wages and other employee entitlements; and
- client/customer funds held by banks and other institutions.
HOW TO COMPLY
The UM Act requires businesses to deal with Unclaimed Money quarterly as set out below:
- Due Diligence: Businesses must use reasonable efforts to locate and notify the Owner of any Unclaimed Money or money that is soon to become Unclaimed Money.
- Transfer Money: If the Owner cannot be located after reasonable efforts, the Holder must transfer the Unclaimed Money to Inland Revenue. Inland Revenue will then hold the money until it is claimed by the Owner.
- Provision of information: When transferring Unclaimed Money, Holders are required to provide specified information including:
- the source and history of the money; and
- any contact details of the Owner.
- Timing requirements: Unclaimed Money must be reported and transferred to Inland Revenue quarterly. Inland Revenue requires information and Unclaimed Money to be sent within 1 month and 20 days of the end of each quarter, based on periods ending each March, June, September and December.
UNCLAIMED MONEY LESS THAN $100
Different rules apply if the total of all amounts of Unclaimed Money of a customer is less than or equal to $100.
The UM Act allows Holders to transfer amounts of up to $100 to the Commissioner of Inland Revenue as Unclaimed Money or Holders may put the amounts to another purpose, such as donating them to charity or retaining the money for the Holder’s own use.
Any money that is applied for the benefit of the Holder, or another use, will cease to be Unclaimed Money under the UM Act. However, the rightful Owner can still claim the money from the Holder in the future.
WHAT HAPPENS IF YOU DO NOT COMPLY
Failure to comply with the UM Act is an offence. Where the Holder is a company, both the company and the individual manager / officer / director who authorised or permitted the failure are open to prosecution. The Court can impose a fine of up to $500 upon conviction for each offence.
COMPLIANCE TIPS
To comply with the UM Act’s requirements, we recommend that businesses:
- maintain clear and accurate records of customers’ and employees’ funds and contact details;
- document all attempts to contact the rightful Owner; and
- schedule reminders and ensure that they report any Unclaimed Money to Inland Revenue within 1 month and 20 days of the end of each quarter.
WHAT IS NOT UNCLAIMED MONEY?
You should be aware that some types of money not claimed are not Unclaimed Money under the UM Act – rather these are managed by Treasury. They include “ownerless money” and “trust money”:
- “ownerless money” is money with no legal owner that automatically becomes Crown property, usually when a company is removed from the Companies Register. It may also include other assets, unless excluded by law, including certain disclaimed property.
- “trust money” is undistributable trust property – typically due to missing beneficiaries when winding up a trust – paid to the Treasury, held for six years, then transferred to the Crown as unclaimed money.
Refer to Inland Revenue’s guidance mentioned below for more information.
FURTHER INFORMATION
For further information please see a copy of the UM Act here and Inland Revenue’s guidance here. If we can assist, please contact your usual Jackson Russell lawyer or one of the lawyers listed below.
