The Smart Family Trust is an inter vivos discretionary trust that was established by the Smart family as a structure through which to conduct their business of land development. The trustees of the trust are Suzy Smart and her husband Steve. A family friend settled the trust several years ago. The class of eligible beneficiaries includes Suzy, Steve and their children.

For the year ended 30 June 2017 the net income of the trust from the land development business amounted to $200,000.

On 29 June 2017 Suzy and Steve, as trustees, made the following resolution:

Resolved that the net income of the Smart family Trust for the year ended 30 June 2016 be distributed as follows after accumulating $1,000:

Barbara (daughter aged 19)10,000

John (son aged 17)10,000

Michelle (daughter aged 14)10,000

Steve95,000

Suzybalance

Additional information for the year ended 30 June 2017

Barbara has been teaching English in Japan for the last year. It is anticipated that she will not return to Australia for another 2 years. She receives no other Australian income.

John works full time as an apprentice chef. He derived $25,000 from this employment.

Michelle is a full-time student. She derived $2,000 working part-time on the weekends and also derived $200 interest income on her savings account with her bank.

Required

On the basis of the information provided explain how the net income of the trust and the taxable incomes of the beneficiaries, where appropriate, will be assessed for income tax for the year ending 30 June 2017.

In your own words, write reasonably argued positions to support your tax treatment of all the tax issues raised herein.Reference ought to be made to relevant tax law and rates, but calculations of income tax payable are not required.Small business entity concessions must be ignored.