The Earnshaw Family Trust was set up under the will of the familys now deceased patriarch, Eric Earnshaw, after his death in 2000. In 2014-15 it carried on a number of income earning activities. They included carrying on a trading business with sales of A$1,000,000 and allowable deductions of $300,000 and renting an office building in New Zealand for which it received A$350,000 in rent and incurred A$50,000 in deductible expenses as well as investments in a range of Australian shares from which it received A$70,000 in fully franked dividends.

There are three (3) beneficiaries of the trust and all are Australian resident individuals:

Fred (the father) aged 45 - who is to be paid 25% of the net income of the trust;

Gail (the mother) aged 42 who is also to be paid 25% of the net income of the trust;

Hugh (a son) aged 17 who is to have the balance of the trust income accumulated for his benefit and paid to him if he attains the age of 25 years subject to the trustee being able to pay, in its absolute discretion, such amounts as it deems fit for his education, maintenance and advancement in life.

In accordance with the terms of the trust, on 30^th June 2015 the trustee distributed the net income of the trust, as to 25% each, to Fred and Gail. Fred was at that point an undischarged bankrupt and had other income of $20,000. Gail had no other income.

During the tax year the trustee also paid Hughs university fees of $10,000 and provided him with a living allowance of $8,000.

Calculate the net income of the trust; (1 mark)

Explain who was liable to pay the tax on the net income of the trust, on what basis and at what rates. (9 marks)