Christine Evans established the “Evans Family Trust” in 2000 with XYZ Pty Ltd as the corporate trustee. Christine and her husband Fred are the directors of the trustee company. The trust holds a variety of investments in property and cash. The trust was primarily established to protect the investments.

The trust records for 2019-20 income year disclose the following:

Receipts ($)

100,000 Rent from investment properties

10,000 Interest from a bank account

Payments ($)

2,000 Accounting expenses for tax return

10,000 Repairs to investment properties

4,000   Interest on a loan for the investment property

1,000   Legal expenses incurred in defending a claim by a tenant

Christine does not work but Fred is a senior manager and received a salary of $180,000 during the 2019-20 tax year.

They have three children:

• a son, Callum, aged 22 years, a student at university who earned $5,000 for the year;
• a daughter, Caitlin aged 20, also a university student who earned only $2,500 for the year; and
• a second daughter, Grace, aged 14 years, a full-time high school student with no other income.

Fred has his grandmother living with him and she had no income for the year. All family members are beneficiaries of the trust. Fred also established a corporate beneficiary, and this is available to receive trust distributions.

Required:

Calculate the net income of the Evans Family Trust for the 2019-20 tax year. 

Advise Fred as to how he can distribute the net income in the most tax-effective way. Show all calculations and cite relevant legislation where appropriate to support your answer.