Justin's parents operate a restaurant business through a family trust, The Pepper Family Trust, which had the following receipts and expenses for the year ended 30 June 2011 (the business uses the accruals basis to account for their income):

Justin's father, John, is the trustee of the trust and decides to distribute the trust's income to the following beneficiaries (without distinguishing between the different types of receipts):

• Mandy Pepper, age 14 (who has no other income):                                  $3,000
• Justin Pepper, age 26 (who also has $2,000 of interest income):               $78,000
• Salt Co Pty Ltd (which has the other income listed below):                    the balance

- Unfranked dividends from a resident private company $16,000, and

- Partly franked dividends of $2,000 (franked to 60%).

In relation to the above facts about the Pepper Family Trust answer the following:

(A) Discuss and calculate the 'Net Income' of the Pepper Family Trust for the 30 June 2011 income year. Assume that the Trust is not a small business entity and uses the diminishing value method.                                 

(B) Determine the taxable income and tax payable for each of the beneficiaries for the 30 June 2011 income year.                                         

(C) Advise the trustee John, of the consequences if he had decided to retain the $78,000 in the trust for future expansion of the business rather than making Justin presently entitled to it.                                                          

For each task, please ensure that you provide full workings and explanations, and that you specify section references to support your conclusions. Include comments on amounts, if any, which are excluded from the net income calculation.