The will of B Dark, who died on 31 March of the previous income year, provides that after payments of debts and legacies the residue of the estate is to be held in trust and the income applied as follows:
- an annuity of $11,000 to be paid to the widow on 1 June each year. If in any year the income is insufficient to meet the annuity, the deficiency is to be met out of the capital of the estate;
- the remaining income to be accumulated and distributed to such of the children as attain the age of 25 years;
- at the discretion of the trustees, to be exercised as they think fit, payments may be made for the maintenance, education and advancement of the children, such payments to be made out of the share of income to which each child is contingently entitled while under the age of 25 years. There are two children of the deceased: Maxine, aged 12 and a full-time student, and Judy, who is married and aged 22. The deceased was a solicitor whose taxable income has always been calculated on a cash basis.
The following is a summary of the trustee's cash receipts and payments for the two income years ended 30 June this year:
Year ended 30 June last year $
Receipts Net rental income 1,200
Interest 2,600
Professional fees (outstanding at death) 8,000
Payments Annuity paid to widow 11,000
Year ended 30 June this year
Receipts
Net rental income 45,400
Interest 43,600
Payments
Annuity to widow 11,000
Payments for the maintenance of Judy 6,800
Payments for maintenance of Maxine 9,300
Blocks of flats purchased in joint names of
Maxine and Judy 40,000
The professional fees outstanding were collected within two weeks of the deceased's death. The remaining income was accumulated as directed. Indicate how the payments made by the trustee and the amounts accumulated would be assessed in respect of each of the two years, assuming the beneficiaries have no other income. Calculate any tax payable and indicate who is liable for payment of the tax.