Advice to investment adviser
Peter Gow is an investment adviser with BZK Limited, a large financial planning group in Sydney that have funds under management of $260 million. He has advised the Board of Directors that they should sell the fund’s 1 million shares in BHP which will result in a profit of $12 million to the company. The Board agrees and on 14 May 2013 the shares are sold. Peter also notices that the 4 million Telstra shares have not performed as well as expected and that they currently show a loss to the group of $16 million. The Board agree that the shares should be sold due to their lack of performance and on 16 June 2014 the Telstra shares are sold. In November 2013, Peter notices that a number of stockbrokers from the large banks are now recommending that Telstra shares are a ‘buy’ and an excellent investment due to solid growth projections in the future. Peter now recommends to the Board that 4 million Telstra shares be bought. The Board agrees and on 19 September 2013 the shares were acquired. The auditors for BZK have just completed the accounts for the company and have advised the Board that their ACTIONS IN SELLING BOTH THE BHP AND TELSTRA SHARES PRIOR TO 30 JUNE MAY CONSTITUTE TAX AVOIDANCE UNDER PART IVA. Provide Peter with advice as to BZK’s position.