More than 3000 alleged welfare cheats receiving a total of $33.7 million a year have been caught in the past six months.
The Government says the findings are the result of a new way of sharing information between Inland Revenue and the Ministry of Social Development.
Associate Social Development Minister Chester Borrows said a total of 3139 people were caught in the investigation, with 1948 on an unemployment benefit and 559 on a sickness benefit.
He said the ministry believed it would be able to prove a ''big chunk of them'' were intentionally defrauding the taxpayer though some could have been a legitimate oversight, he said.
''The fact is that these 3139 have been found to be paying more tax than they should have been if they were only earning their $100 a week maximum that they were allowed to on a benefit, so there is obviously a reason for suspicion there,'' he said.
''Then the question is: How long have they been doing it for?''
A further 645 people were assessed as being better off with other financial assistance, such as Working for Families, and moved to those subsidies.
The new way of information sharing highlighted the beneficiaries whose taxable income did not match what they had declared, Borrows said.
The ministry's investigation unit was now looking at who would be prosecuted and who would be dealt with in other ways, though all would have to pay the money back, he said.
Investigators were looking at how long the person had been receiving the dual income and how much they had received when making those decisions.
Borrows said it would be better in some cases not to prosecute to ensure those people who committed lower-levels of fraud would not lose their job and be forced to go back on a benefit.
It would also spare ministry resources, he said.
They were expecting ''a much greater increase in the number of people prosecuted as a result,'' however.
MSD will seek to recover all of the overpaid money and would seek attachment orders to wages which Borrows said should see the debts repaid faster than most benefit fraud debt.
''MSD staff are working through the information, including a large group of clients identified as being eligible for a benefit, but having incorrectly declared their income.''
There was more than 20,000 people under this other group investigators were looking at though a spokesman said many of them would still be eligible for a benefit.
Borrows said they were also targeting people who were earning extra money under the table.
The Government recently revealed that there are 10,000 fewer people on a benefit compared with last year and Borrows said these 3139 people were part of that figure.
The Government this week announced a major overhaul of the welfare system including he reduction of the number of benefits from seven to three, compulsory drug-testing for beneficiaries when required by potential employers, increased healthcare obligations for beneficiaries with young children, and an increased focus on getting people into jobs.
- © Fairfax NZ News
Can the ACT Party survive?Related story: ACT life support still on