Question 4: 5 Marks

Steven Cross formed a discretionary Family Trust in favour of five children, the children are as follows:

-Gillian, aged 25 and married

-Jeff, aged 23, certified insane and confined to an institution

-Simon, aged 19, a university student

-Louise aged 16, a secondary student

-Boris, aged 4

The Trust Deed states that

-Gillian is entitled to 25% of the trust

-Jeff, is entitled to 25% of the trust

-Simon, entitled to 20% of the trust which is to be accumulated until 21 years of ages; vested and indefeasible interest

-Louise, entitled to 20% of the trust which is to be accumulated until 21 years of ages; contingent upon her surviving until age 21

-Boris does not have a fixed percentage entitlement and the trustee has discretionary power to make payments out of the trust income for the benefit of Boris

-The remainder of the trust income is retained to accumulate in the trust.

During the year, the trust exercised their discretionary authority and paid $7,000 medical expenses on Boriss behalf.

The gross income of the trust was $123,000 and deductible expenditure was $3,000.

Simon derived $7,000 wages and PAYG(W) $800 during university vacations.

Required:

For the current year of income calculate the following

(a) S 95 net trust income

(b) The share applicable to each beneficiary

(c) The payable by each beneficiary and /or the trustee

Answer:

(a) S 95 NTI

Gross income of the trust

Less

Allowable Deductions

Net Income of the Trust

(b)

Beneficiary	Presently Entitled	Legal Disability	Amount	ITAA36	Who is assessed
Gillian
Jeff
Simon
Louise
Boris
Residue
Total

(c)

Gillian

$

Tax on $30,000

Medicare Levy:

Tax payable:

Jeff (Trustee assessed)

Tax on $30,000

Medicare Levy:

Tax payable:

Simon

Trustee:

Tax on $

$

Beneficiary

Tax on $

Medicare levy:

- Tax paid by trustee

- PAYG (W)

Tax Payable

Boris (Trustee assessed)

S 102AC (1) prescribed person

& 102AG not excepted

Therefore, tax at Div 6AA rate

Tax on $ @ 47%

Residue (Trustee assessed)

Tax on $ @ 47%