I realised that most of my friends do not really look at their tax filing because their employers are in the “auto inclusion” scheme with IRAS. Moreover, their payment for taxes are automated with GIRO. However, tax relief is manually filed and with some planning, your taxes can be reduced. These are some effective schemes you can volunteer for
- CPFSA top up for yourself – Up to $7,000
- Medisave or retirement account top up for your parent – Up to $7,000
- SRS contribution for yourself – $15,300
You may read some of our other articles to know more about them. Others methods to reduce taxes include making donations (I contribute to NKF and CCF). You may also want to check which of your employment expenses and course fees can be declared to reduce taxes under IRAS guidelines.
** Note that the CPF relief is ONLY for the employer portion which is 17% (for ages 55 and below) and not your full CPF contribute.
Guy staying with parents and still an NSMen
The NSMen relief/ CPF relief/ Earned income/ SRS/ CPF top up reliefs are all auto added in by IRAS. For a guy staying with his parent, there is a $9,000 relief provided that he/she is not working. At this chargeable income of around $40,000 remaining, he is only paying $30/month!
Mum with 2 kids and a maid
The NSMen relief/ CPF relief/ Earned income/ SRS/ CPF top up reliefs are all auto added in by IRAS. For a mum with 2 kids, she qualifies for 35% tax relief through the working mother child relief which is pretty powerful. If she employs a maid for her young children, she will be on a concessionary maid levy and qualify for foreign worker maid relief. The total relief amounts to more than $80,000 (new rules cap relief at $80,000) and her chargeable income is only $20,000. This means she is tax free!
Common question: Can I claim “Life insurance relief”:
Usually NO. Unless your employee CPF contribution is less than $5,000.
Then, claimable amount can be up to $5,000 less employee contribution. Life insurance relief = lower of 7% of “Life Insurance Value” or premium amount.
Just yesterday, Dr Theseira at the Singapore Economic Policy Forum called for a tax reform as CPF relief benefits the rich. He proposed that the Government implement a “credit system” where taxpayers get the same amount in income tax relief (for CPF contributions) regardless of which income bracket they fall into. This is an interesting suggestion.
The above examples are for residents who are employed. If you are self employed, the strategies may be different. Click here
Image credits: http://www.freeimages.com/photo/agog-happy-male-face-1-1428089