Brian is a 17-year-old school student who holds a 20% interest in the Lily Trust. The Lily Trust is a unit trust voluntarily established and managed in Australia by its trustee. Brian does not derive any other investment income.

The Lily Trust derived net income of $25,000 for the income year ended 30 June 2022, which consisted of the following:

• $20,000 rental income from a property located in Australia.

• $3,500 cash dividend, which was franked to 100% and received from a company with a corporate tax rate for imputation purposes of 30% with only Australian-sourced profit.

 
For the income year ended 30 June 2022, the trustee made a valid resolution to distribute 20% of each component of the income of the trust estate to Brian.

Q: Explain the income tax consequences to Brian of receiving the distribution for the income year ended 30 June 2022. Provide a key legislative section reference to support your answer.

Answer rating: 100% (QA)

The income tax consequences to Brian of receiving the distribution from the Lily Trust for the incom... View the full answer