70.2K

Verified Solution

Link Copied!

Subject: Taxation

Mia Tuiti and her husband Hemi Tuiti are a couple who run a successful business - Tuiti Bee Products Limited ("TBPL"). They plan to expand TBPL's market and have engaged you to provide them with tax advice regarding their business plan. TBPL was established 6 years ago. It is registered for GST. The company sells Manuka honey in both New Zealand and overseas markets. The business performed very well in the last couple of years. Currently it has retained earnings of $620,000. Mia and Hemi are the shareholders and directors of the company. Each of them holds 50% shares of the company. They are paid director fees from the company's earnings. TBPL currently collect raw honey from its apiary and also purchase raw honey from other apiarists. The raw honey is then sent to a factory to be purified, labeled and packed. TBPL then sell the products on the market. Some Asian customers repeatedly enquired if TBPL sells other bee products, such as bee venom, royal jelly or propolis. Currently TBPL sells these bi- products at a very cheap price. Mia and Hemi are keen to establish their own factory and expand the products range. They have found an ideal factory located at Whangarei. The vendor would like to sell the land and the business together. Mia and Hemi have some difficulty to raise sufficient fund to buy the factory. They are considering selling some shares to Hemi's friend Daniel Tamati and his wife Mina Tamati. The Tamatis are developers who are looking for a good business to invest the profit they earned from their property development. Daniel and Mina would like to acquire 50% of TBPL's shares. Mia and Hemi have some concerns whether involving Tamatis into their business will create any adverse tax impact. Required: To provide your opinion on the following tax issues: Based on the Imputation credit, thinking about the tax impact of introducing new shareholders, Daniel and Mina Tamati. Mia Tuiti and her husband Hemi Tuiti are a couple who run a successful business - Tuiti Bee Products Limited ("TBPL"). They plan to expand TBPL's market and have engaged you to provide them with tax advice regarding their business plan. TBPL was established 6 years ago. It is registered for GST. The company sells Manuka honey in both New Zealand and overseas markets. The business performed very well in the last couple of years. Currently it has retained earnings of $620,000. Mia and Hemi are the shareholders and directors of the company. Each of them holds 50% shares of the company. They are paid director fees from the company's earnings. TBPL currently collect raw honey from its apiary and also purchase raw honey from other apiarists. The raw honey is then sent to a factory to be purified, labeled and packed. TBPL then sell the products on the market. Some Asian customers repeatedly enquired if TBPL sells other bee products, such as bee venom, royal jelly or propolis. Currently TBPL sells these bi- products at a very cheap price. Mia and Hemi are keen to establish their own factory and expand the products range. They have found an ideal factory located at Whangarei. The vendor would like to sell the land and the business together. Mia and Hemi have some difficulty to raise sufficient fund to buy the factory. They are considering selling some shares to Hemi's friend Daniel Tamati and his wife Mina Tamati. The Tamatis are developers who are looking for a good business to invest the profit they earned from their property development. Daniel and Mina would like to acquire 50% of TBPL's shares. Mia and Hemi have some concerns whether involving Tamatis into their business will create any adverse tax impact. Required: To provide your opinion on the following tax issues: Based on the Imputation credit, thinking about the tax impact of introducing new shareholders, Daniel and Mina Tamati

Answer & Explanation Solved by verified expert

See Answer