The income tax return for the Zebra Discretionary Family Trust (an Australian resident trust) for the year ended 30 June 2020 has been prepared and discloses a net income of the Trust (calculated in accord with s.95, ITAA 36) as follows:
- Rental income (from overseas sources) 16,928
- Unfranked dividends (Australian sourced) 3,571
- Franked dividends (Australian sourced) 15,000
- Gross up of franked dividends 6,429
- Interest income (from overseas sources) 8,072
- Net trust income 50,000
The trustees Mr and Mrs Brown have resolved to distribute $30,000 of the net trust income in equal shares to the following beneficiaries:
- Petal Brown, niece to Mr and Mrs Brown, aged 13 (at school, no other income);
- Tommy Brown son to Mr and Mrs Brown, aged 19 (at uni, $4,000 other income); and
- Charles Brown, father to Mr Brown, aged 60 (no other income) and a non-resident of Australia for the year ending 30 June 2020
Each distribution comprises 50% Australian sourced and 50% foreign sourced income. The remaining $20,000 is undistributed and also is comprised 50% Australian sourced and 50% foreign sourced income.
Advise the trustee and beneficiaries as to how tax is paid on the distributions and the undistributed income and who is liable to pay that income tax. References to ITAA must be cited.