Government ministers will receive a flat rate of $37,5000 to cover accommodation costs in Wellington, following a review of expenses.
The spending of a number of MPs came under intense scrutiny with the release of details of all MPs' travel and accommodation expenses at the end of July. Previously, only ministerial expenses were made public.
In August, Prime Minister John Key commissioned a report from Ministerial Services to identify ways of simplifying the current scheme and to ensure value for money.
The report, made public on Monday, recommends that ministers take care of their own accommodation arrangements and be given the fixed payment, which is based on a market equivalent of rent and other costs.
At present, all MPs are entitled to reimbursements of up to $24,000 a year, with ministers given the option of a ministerial residence.
Mr Key says a second category will be created for those who choose to stay in their home in Wellington. They will receive $30,000 a year towards their expenses.
The Prime Minister says the new regime strikes a balance between the rights of taxpayers and ministers, and will save the country hundreds of thousands of dollars.
The report also suggests selling off all the ministerial houses, except Premier House, but Mr Key says that will need further consideration.