Peter is the trustee for the Peter Brady Family Discretionary Trust which was established to benefit his two eldest children, David and Michael. David is 17 years old and studies accounting at university. Michael is 25 years old and earns $10,000 per year from casual work. David and Michael both live in Sydney.

During the financial year ended 30 June 2019 the trust received $7,000 in fully franked dividends. The trust did not receive any other income. Peter distributed 40% of the net income of the trust to David and 50% of the net income of the trust to Michael. Peter retained 10%of the net income in the trust.

Calculate the tax payable by the relevant parties. Your answer must be supported by legislation, case law and tax rulings (if any).