Betty Glitter, a New Zealand tax resident, inherited $1 million from her uncles estate two years ago. Based on her best friends advice, she invested all the money in a diversified portfolio of New Zealand and Australian shares and bonds.

Since last Christmas, she has been thinking of selling her portfolio and investing the money in a Multi-rate PIE (MRP) that concentrates only on Australasian equities (i.e. Australian and New Zealand shares). Betty currently works full time for Bee Ltd, earning a salary of $185,000 p.a.in the 2022 income year. Regal Trust owns 100% of Bee Ltd, a trading (ordinary) company. Her husband, John, is the trustee of Regal Trust and the beneficiaries are their two children, Lemon, aged 18, and Orange, aged 16. Bettys father, Evan, is the settlor of the Imperial Family Trust. Both trusts are complying trusts and were set up several years ago. As she only worked part-time, Bettys taxable income in 2021 and 2020 income year is $60,000 and $40,000, respectively.

Assume Bee Ltd files quarterly FBT returns

1. If Betty invests in an MRP on 1 April 2021, what is her prescribed investor rate in 2022 income year? You are required to show how you worked out the rate and you must provide supporting references from the Income Tax Act 2007.

2. Is it advisable for Betty to invest her $1 million in an MRP? Give at least two reasons. You must provide supporting references from the Income Tax Act 2007.

3.I f Bee Ltd provides an interest free loan to Imperial Family Trust, will there be any FBT or dividend implications? You must provide supporting references from the Income Tax Act 2007.

4. If Bee Ltd, as a goodwill gesture, bought a Christmas hamper worth $250 for each of its six employees spouses, will there be any dividend implications? No other benefits were provided. You must provide supporting references from the Income Tax Act 2007.