Under ASX Listing Rules the plans must be approved by shareholders and may provide employees with a prospectus. The dividend imputation tax system has caused companies to increase their dividend payout ratios. Shareholders obtain tax benefits of imputation and the costs of operating a DRP are lower than rights issues and share placements for many companies. A bonus issue is a free issue of shares made to existing shareholders. With the proposed abolition of par value bonus issues will not be possible because of the combination of issued capital account and reserves.
Share splits achieve a similar result.
They are typically made by companies performing well and experiencing increase in share price. A bonus issue or share split involves no cash flow and does not affect shareholders' wealth. However there may be an increase in share price following the announcement of forthcoming bonus or split. The announcement has information content. The market is confident that total dividend payout will be increased due to not reducing DPS to the extent to maintain the dividend payout, which, in turn, indicates the confidence of management.