In 2020, 7.9% of the vote went to parties that did not meet the threshold, translating to 10 seats.
This meant that 10 seats ended up being distributed amongst the parties that did make it in. Labour had received 60 seats which is 50% of the seats in Parliament.
After the reallocation Labour received an additional 5 seats (50% of the 10 seats mentioned earlier) which meant Labour ended up with 65 seats giving them a clear majority in Parliament at 54%. National received an additional 2 seats and the Greens, Act and Maori parties got an additional 1 seat each.*
The video below shows how the “wasted vote” phenomenon works in practice – based on what happened in the General Election in 2020.
* It's a bit more complicated than this due to the formula used but it's the simple way to explain it.