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