How to pay less tax next year?

Tax planning is not just for the wealthy. With proper research and advice, anyone can optimise their personal tax obligations to enjoy more disposable income.To help reduce your income tax burden, we chat with Ms. Wu Soo Mee, Accredited Tax Advisor (Income Tax) of the Singapore Institute of Accredited Tax Professionals for her best tips and strategies.


1. Understand the system to maximise your benefit.

There are several tax reliefs and deductions made available for different scenarios. Ms Wu advises, “Make sure you make the correct claims by checking your relief eligibility with a tax consultant or against the IRAS website.”

“One common mistake people make is applying to claim child relief or spouse relief without realising that the child/wife cannot have income of more than $4,000,” says Ms Wu.

“A little research can save you from a long string of unnecessary tax payments,” says Ms Wu.

Optimise your tax with lesser known reliefs:

(a) Grandparent Caregiver Relief

Who it benefits:
Married/widowed or divorced mothers with children age 12 and younger whose parents or grandparents are caregivers of their children. The caregiver must be living in Singapore.

The benefit:
$3,000 tax relief


(b) Course Fee Relief

Who it benefits:
Those who attend courses, seminars or conferences to gain approved professional qualifications related to their trade or profession.

The benefit:
Up to $5,500 tax relief, depending on how much you pay for the course.


(c) Handicapped Brother/Sister Relief

Who it benefits:
Those who incur at least $2,000 to support a handicapped sibling/sibling-in-law living in the same household.

The benefit:
$5,500 for each handicapped sibling/ sibling-in-law


(d) Handicapped Parent Relief

Who it benefits:
Those who have applied for parent relief can request for increased relief if their parent is handicapped.

The benefit:
Parent Relief is $9,000 if the parent is living in the same household, and $5,500 if not.

For handicapped parents, the relief will increase to $14,000 and $10,000 respectively.


(e) Donations

Who it benefits:
Those who make donations to which are not for advertising purposes or provision of material benefit to the donor. To qualify for relief, the donations cannot be used for foreign charitable purposes.

The benefit:
Deduction of 300% of the amount donated in 2015 and 250% for donations made in 2016.


(f) Deductions for rental income expenses

Who it benefits:
For year of assessment 2016 onwards (for 2015’s income), those who derive rental income have a simpler way of claiming their expenses based on 15% of total rental income and they are not required to keep receipts for the expenses. However, if they incur expenses of more than 15% of the total rental income, they can continue to claim expenses based on actual incurred and receipts for these expenses must be kept. The 15% expenses claim is in addition to the mortgage interest expense.


2. Save up for your future, reduce tax today

Getting familiar with the various tax-saving schemes that encourage Singaporeans to build up their retirement savings can help reduce your tax at the same time. Ms Wu recommends the following options:

(a) Topping up your Medisave savings

If you make voluntary cash top-ups to your Medisave Account, you maximise your healthcare savings and get tax relief for the amount you top-up. These top-ups will be tax-deductible for the recipient. Find out more.

(b) Topping up your Retirement savings

“Consider saving towards a parent / grandparents or in-laws’ CPF Special / Retirement Account to build their retirement savings and claim tax relief in respect of it.”

Ms Wu added “You can also make cash top up to spouse’s and siblings’ CPF Special / Retirement Account and enjoy a relief of up to $7,000 provided the their annual income doesn’t exceed $4,000. The maximum relief of $7,000 for topping up for your family members is in addition to another $7,000 if you make a cash top-up to your own account.” Find out more.

(c) Contributing to Supplementary Retirement Scheme (SRS)

“Contributions to SRS either from yourself or your employer will qualify for personal relief up to the equivalent of CPF annual Limit,” Ms Wu shared.

“Employer’s contributions are taxable but the tax on this amount can be negated by the personal relief allowed for this same contribution. This is one way for an employer to provide additional pension benefit that is tax free at the time of contribution.”

Only 50% of the total SRS savings withdrawn after the statutory retirement age is taxable. The remaining 50% will be taxable to the individual as income in the year of withdrawal.

If you apply for withdrawal in 10 instalments, you’ll enjoy a lower tax rate spread over a decade.

If savings are withdrawn before the statutory retirement age, there is a penalty of 5% on the amount, and the full amount withdrawn is taxable. Find out more.


3. Know the life-stage specific tax reliefs that you are entitled to

“Working Singaporean mothers with Singaporean children are entitled to the Working Mother Child Relief. The relief is dependent on the birth order of the child and varies from 15% to 25% of mother’s earned income,” Ms Wu reminded. “Divorced or widowed parents can also enjoy Parenthood Tax Rebate.

“For married couples, Parenthood Tax Rebate can be shared based on mutual agreement,” Ms Wu advises. “In most cases, the rebate should be set off against the spouse with higher income tax rates to reduce the combined tax bill for the couple.”

If you need more information, check out these useful guides on the IRAS website:

Ms Wu is also a Tax Partner at Ernst & Young Singapore.

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