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. A bonus issue is treated as dividend income in the hands of shareholders for taxation purposes unless the issue is made from share premium account. Therefore, recently most bonus issues have involved debiting share premium account and crediting issued capital account. 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. They may be made to reduce high dividend per share or to reduce market price per share that makes it easy to raise capital. 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.