A financial adviser has slammed the tax department for incompetence and says they are making a "morally wrong" decision by not paying out $42 million to Kiwis who have over paid tax on their investments, including KiwiSaver.

But the Inland Revenue says the system it used before April did not allow it to work out which prescribed investor rate people should be on and current law is stopping it from paying that money out.

Revenue minister Stuart Nash has said he will look into changing the law to allow overpayments to be refunded in the future but the onus has