Finance Minister Bill English is to pay back about $12,000 worth of his taxpayer-funded housing allowance, but says the decision is not an admission that he was in the wrong.
Mr English, who lives in his family home in Wellington, has received almost $24,000 from Ministerial Services in the first six months of the year for accommodation.
The amount is about twice as much as other MPs and ministers who live in their own homes in the capital.
The larger payment has been possible because Mr English's house is owned by a family trust, of which he is neither a trustee or a beneficiary.
Mr English says he does not accept that he has done anything wrong, but he understands that it does not look good.
He says as Minister of Finance it is his job to lead by example, and he intends to clear it up by paying back the difference between the allowance he has been receiving and the smaller allowance available to other MPs.
The Labour Party says Mr English has taken the only course open to him. Chief whip Darren Hughes says there has been a lot of public disquiet about the allowances, and Mr English has made the right call.
Review terms of reference
The Government has released the terms of reference for the review of ministerial accommodation in Wellington and is expecting a report by the end of August.
Prime Minister John Key on Monday asked Ministerial Services to take a fresh look at the rules, in the face of the row over MPs and ministers' expenses.
Officials have been asked to come up with options for a simple, transparent system that represents value for money to the taxpayer and allows ministers and their families to be suitably accommodated in Wellington.
The review will be conducted by the Department of Internal Affairs, with external quality assurance.
The department is due to report to Mr Key, as Minister Responsible for Ministerial Services, no later than the end of August.
Speaker signals changes
The Speaker of the House has already indicated checks will be tightened to ensure out-of-town MPs claiming for Wellington accommodation owned by family trusts or superannuation schemes are charging market rates.
Lockwood Smith says he thinks the current system is robust and fair to everyone but there is a public interest in transparency.
He says as long as there is an independent review of the market value of the rent, it is immaterial who it is paid to.
Conflicting answers from PM
The Government is facing continued questioning over MPs' expenses, with Mr Key giving conflicting statements about the actions of his deputy.
On Monday Mr Key said Mr English would not have been eligible for a ministerial allowance if he had been a trustee.
But on Tuesday he said the ownership stake would not have made any difference.
Mr English has defended his actions, saying the change of status was not about the money.