Accountants are urging the government to act quickly to fix up anomalies in a company structure that can result in shareholders paying tax on losses.
Look Through Companies (LTCs) were created in 2011 to replace Loss Attributing Qualifying Companies (LAQCs) because some were abusing the system.
But the Institute of Chartered Accountants says the legislation was rushed and poorly thought though, and three years on there are still several holes that need fixing.
There are around 45,000 LTCs in use, and they are typically used to manage the tax affairs of small family-owned businesses or rental properties with fewer than five shareholders.
But several problems have plagued the regime since its inception three years ago, and Deloitte partner Darren Johnson said some company owners were having to pay tax on a loss as a result.
"The rules did go through a reasonable quick legislative process so practitioners are having some concerns that the rules don't always apply as intended," he said.
"A particular concern at the moment is a reasonably technical area of tax and debt forgiveness rules, and these rules can actually result in a taxpayer having to pay tax on a loss, which is clearly an unintended outcome."
LTCs are a popular choice to manage investment properties. However, many rental properties run at a loss and if losses are not recovered when a property is sold, that loss is taxed due to an anomaly in the rules.
One accountant, who did not wish to be named, told Radio New Zealand many of his clients had put their plans to sell their rental properties on hold and were waiting and hoping the rules would be clarified. Until then, he was not recommending any of his clients used a LTC.
Institute of Chartered Accountants tax lead Peter Vial said it would be pushing hard for changes to the LTC regime this year.
"Tax is always complicated but it should be able to be fixed," Mr Vial said.
"There's a whole lot of intersecting technical issues that arise, so it's not super simple, but if the project focusses on the issues, the Government should be able to fix them."
Inland Revenue said its officials are aware of a range of issues concerning LTCs but it would not be making any comment until it released a discussion document on these issues around middle of the year.