The Ocean’s Eleven Family Trust commenced in 2005 when it was settled by a family friend, Reuben Tishkoff. The trust has a number of investments and also operates a business. The trustees had employed a full-time manager who managed the business and one full-time staff member.

The income and deductions for the current year are as follows:

Income

Dividends from a number of companies                          150,000

Franking credits attached to these dividends                    90,000

Unfranked dividends                                                         110,000

Business income                                                               780,000

Interest                                                                                 36,000

Sale of a factory building which had been used in the business. The building had been sold on 17 July 2016. Commission on sale was $7,500. It had been bought on 1 July 2007 for $230,000. The trust completely repainted and rewired the property at a cost of $15,000 immediately after purchase. Stamp duty on purchase was $5,200.                              450,000

Expenses

General operating expenses of the business                  430,000

Provision for annual leave                                                   15,000

Salary to Virgil Malloy, one of the beneficiaries who didn’t receive any distributions from the trust but worked in the business during his university holidays                              30,000

Notes to expenses

Annual leave taken by the Manager and the staff member was $20,000.

On 10 November 2015 the Manager had launched a takeover of a business. The takeover attempt cost $22,000 but was unsuccessful.

SBE Elections are to be used

Beneficiaries

The net income of the trust was distributed as follows:

Capital gains to Danny Ocean. He is 42 years of age and has no other income but has a capital loss of $45,000 from the sale of shares in the previous financial year.

Rusty Ryan who is 17 years old is entitled to the interest which is to be accumulated until he turns 18 years of age. If he should die before turning 18 the accumulated funds will be donated to a charity selected by the settlor in the trust deed. In the current year the trustee spent $25,000 buying Rusty Ryan a car when he turned 17. Rusty Ryan also earned $12,000 from his part-time job at the local casino.

Franked Dividends and $66,240 of the unfranked dividends to Linus Caldwell. He is also 17 years of age. Linus also has $3,000 interest from a bank account started by his grandparents the day he was born and $16,000 from the deceased estate of his great aunt. The trustee of the great aunt’s deceased estate had paid tax of $1,500 on this income. Linus is a double orphan due to the unexplained deaths of her parents

50% of the net business income to Beatrice Ocean who is 26. She has no other income.

Any remaining income was retained by the trustee.

Questions

Calculate the net income of the trust and the Div 6E net income, setting out the income excluded from the Div 6E net income.

Calculate the taxable income and net tax payable of the beneficiaries

Calculate the net tax payable by the trustee

Provide the legislative references from the Income Tax Assessment Act 1997 and 1936