Audrey Young usefully writes on whether votes for small party that does not make the 5%/1 seat threshold are re-allocated to all other parties. The answer is No, but the effect is much the same as if they were. Confused? Let’s take an example:

Let us say National got 400,000 votes out of 1,000,000 or 40.0% of the vote. Now on 40% of the vote National would get around 48/120 seats in Parliament. A formula is used to calculate the exact allocation, but for now I’ll use approximations.

Now what is the case if 40,000 of those 1,000,000 total votes were for parties that did not make the threshold. No, they are not re-allocated but they are disregarded for the purposes of allocating List MPs and it means the total number of “effective votes” was 960,000 not 1,000,000. And hence National got 41.7% of the “effective  vote” which would get them 50/120 seats in Parliament.

Now there is no actual reallocation of votes from parties that do not make the threshold, but because the number of effective votes is reduced people tend to say the 4% wasted vote was reallocated and National went from 40% of the total vote to 41.7% of the effective vote. If Labour was also on 40% of the total vote they would also be on 41.7% of the effective vote. Hence why people say that effectively a vote for a party that does not make the threshold is reallocated to all other parties.

They are wrong in using the word re-allocate, but correct in describing the effect.