(a) That's right. Income from a trust can be distributed among the various beneficiaries in a way that minimises tax liabilities. This is a major advantage of using a trust to run a business.

A trust that carries on a business must have its own Tax File Number, and the trustee must submit an annual tax return showing the income earned by the trust, the deductions made for expenses, and the amount of income distributed to each beneficiary.

If all the net income is distributed to adult beneficiaries who are resident on Australia, those profits are not taxed in the hands of the trustee and the individual beneficiaries will be taxed on that income at their marginal rates. If the beneficiaries are adults or minors who are resident in countries other than Australia, the trustee pays tax on their behalf, but the beneficiaries are credited with that payment when they submit their individual tax returns.

If the net income of the trust is accumulated by the trust, rather than being distributed, then tax is paid by the trustee at the highest individual marginal rate of tax.

In the circumstances of the case study, Edward could identify himself, his wife and his two children as beneficiaries. Edward could then use his discretion as to how profits should be distributed. He could then distribute all the annual trust income between himself, his wife and his two children, to minimise the tax payable.