• The late Mr Collings set up a trust two years ago. The trust, known as The Collings Family Trust was established over his portfolio of property. This portfolio includes shares as well as residential and commercial properties. In the last financial year, the trust distributed 25% each to the income to two beneficiaries:

  • Darcy (who is 21) and
  • June (who is 17).

   

  Both beneficiaries are his grandchildren and both are fulltime students. The remaining 50% is retained in the trust to be distributed when June is 25.

   

  In this tax year the trust records show the following:

  Income

  $1,500,000 received from Australian rental properties

  $150,000 interest from high yield bank accounts

  $700,000 fully franked dividends*

  Expenses

  $15,000 in bank fees

  $750,000 repairs to properties

  $5,000 investor advice fees

   

  * Assume the dividends are sourced from companies taxed at 30%

   

  Required:

• Calculate the following, include relevant legislation and/or cases and show any relevant calculations: Your answer must also include a discussion of the franked dividends:

  1. The net income of the trust for this tax year.                                                                                                     (5 marks)
  2. Calculate the tax payable by Darcy and June.                                                                                                     (5 marks)
  3. Explain and calculate the tax on the undistributed income in the trust.                                                                                                     (5 marks)