Question 5: Jack Black has been employed as a plumber for some 10 years but on 1 July 2017 he set up his own company, No Drips Pty Ltd, to provide...

Question 5:

Jack Black has been employed as a plumber for some 10 years but on 1 July 2017 he set up his own company, No Drips Pty Ltd, to provide plumbing services to the public. During the year ended 30 June 2018, No Drips Pty Ltd only provided services to Suburban Plumbers Pty Ltd under a contract arrangement whereby No Drips Pty Ltd was paid $60 per hour as a full and final payment and that Suburban Plumbers Pty Ltd paid all and any liability insurance. Jack is also not required to supply any of his own tools as these are always all supplied to him by Suburban Plumbers Pty Ltd. For the year ended 30 June 2018, No Drips Pty Ltd received $68,000 in fees from Suburban Plumbers Pty Ltd (no GST applies to this income as Jack is not registered for GST).

Jack wants to know if he can claim any of the $11,000 in interest costs on his home mortgage (he says he uses his home 20% for business purposes and that he has not other business premises). He also wants to know if he can claim any of his council rates ($1,000) and property insurance ($800) on his home. He also wants to pay his wife $10,000 in salary for helping him with the bookkeeping for his plumbing business.

Required:

Advise Jack as to whether the personal services income rules apply to him and then as to whether he can claim any of the expenses mentioned?