The Davis Trust is a fixed trust. The trustee is Nicole Davis (42 years old). Nicole is also a beneficiary and entitled to 40 per cent of the trust’s income. Her two children, Ben Davis (21) and Cindy Davis (17) are each entitled to 30 per cent of the trust income.

For the year ending 30 June 2021, the trust earned unfranked dividends of $40,000, which it

purchased with borrowed money. Interest on the trust’s loan was $10,000. Assume that, according to the trust deed, the income of the trust estate will be equal to its net income.

Required:

Calculate the s. 95 net income of the trust estate and advise how the distributions would be taxed citing relevant legislation to support your answer