The government is reviewing the way companies handle tax credits and in particular how they are used by companies that lose money.
At present a company paying out dividends can pass on credits for the tax paid on its profits, known as imputation credits.
But companies making a loss may pass on the benefits to another part of their group making a profit. This system of loss grouping results in the overall company paying less tax and giving fewer tax credits to its shareholders.
Revenue Minister Todd McClay said the practice could at times work as a disincentive to smaller retail investors and distort investment decisions, as well as causing problems for businesses.
A consultation paper has been put out discussing the issues and options to resolve it, which can be found on the Inland Revenue website. The deadline for consultation is at the end of October.
