: A blog about how you can plan for income during retirement. Retirement Income Plan is often ignored. When…
Every year, Singaporeans are required to file their taxes by 15th April for your income earned in the preceding year. While Singapore’s tax code is rather straightforward compared to countries like USA, there’s still a bit of hoops to jump through if you want to reduce your tax bill.
That’s right, we are talking about income tax hacks that you can use to legally lower the amount of taxes that you have to pay. And if you don’t know any of them, don’t worry because we have got you covered.
The simplest way to reduce your income tax is to save for your own retirement. For every dollar that you top up into your CPF Supplementary Retirement Scheme (SRS) account, you get to deduct that off your annual income.
Under the CPF SRS, every Singaporean can contribute up to $15,300 a year into your own CPF SRS. This will then be shaved off your annual taxable income so that you (hopefully) go to a lower tier of income tax rate.
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
| First $20,000 Next $10,000 |
0 2 |
0 200 |
| First $30,000 Next $10,000 |
– 3.50 |
200 350 |
| First $40,000 Next $40,000 |
– 7 |
550 2,800 |
| First $80,000 Next $40,000 |
– 11.5 |
3,350 4,600 |
| First $120,000 Next $40,000 |
– 15 |
7,950 6,000 |
| First $160,000 Next $40,000 |
– 18 |
13,950 7,200 |
| First $200,000 Next $40,000 |
– 19 |
21,150 7,600 |
| First $240,000 Next $40,000 |
– 19.5 |
28,750 7,800 |
| First $280,000 Next $40,000 |
– 20 |
36,550 8,000 |
| First $320,000 In excess of $320,000 |
– 22 |
44,550 |
Source: IRAS
Let’s say you are earning $90,000 a year. This means that your tax rate will be at the 11.5% tier.
Income tax = $3,350 (taxable for first $80,000 of income) + 11.5% x $10,000 = $4,500
If you had contributed the max amount of $15,300 to your CPF SRS, then your income tax will be as follows: Income tax (after CPF SRS contribution) = $550 (taxable for first $40,000 of income) + 7% x $34,700 = $2,979
That’s a whopping ~$1,500 worth of tax savings just by contributing to your own CPF SRS.
Tip: If you are thinking about taking advantage of your CPF SRS, remember that the money in your CPF SRS doesn’t earn much interest rate. It is unlike your CPF Ordinary Account (OA) which is earning 2.5% interest rate every year. Instead, you will need to actively allocate your CPF SRS into different investment tools like bonds, endowments, or stocks.
If you need financial advice on how to manage your CPF SRS, Moneyline can provide a free financial and wealth planning service for you. Get your appointment fixed here.
What if you want to save up for retirement, grow your retirement savings, but don’t want to headache about how to generate those returns? Well, you have the option of tapping onto the risk-free rate that CPF Special Account (SA) provides.
As we all know, your money in the CPF SA grows at 4% interest rate per annum. You can top up into your CPF SA (instead of CPF SRS) and grow your money at the same 4% every year.
There are, however, certain limitations that apply. For instance, unlike CPF SRS, you can only top up a maximum of $8k into your own CPF SA every year. But there’s a reason why CPF SA doesn’t allow the same top up amount as CPF SRS.
That’s because you can choose to top up another $8,000 into your loved ones CPF SA. CPF defines loved ones as your parents, parents-in-law, grandparents, grandparents-in-law, spouse, or siblings.
And you don’t have to top up all $8,000 into a single person’s account. For example, you can choose to top up $2,000 each into your parents and parents-in-law account. That adds up to $8,000 as well.
In total, you can reduce up to $16,000 in your annual taxable income by contributing to CPF SA.
On that same note, you might also want to consider topping up your MediSave account. That’s if you are thinking about making more than $16,000 contribution for your own retirement.
If you have already hit the $16,000 ceiling on your CPF SA contribution, you can try topping up into your MediSave. Just like CPF SA, your money in MediSave is also growing at 4% interest rate.
There is a caveat for this tax relief though. The caveat is that your MediSave account must have less than the Basic Healthcare Sum (BHS). According to CPF, BHS is the estimated savings you need in your MediSave Account for your basic subsidised healthcare needs in old age. For most of us, that BHS is currently set at $68,500.
| Age in 2023 | Year when cohort turned age 65 | Cohort BHS (fixed for life) |
| 65 | 2023 | $68,500 |
| 66 | 2022 | $66,000 |
| 67 | 2021 | $63,000 |
| 68 | 2020 | $60,000 |
| 69 | 2019 | $57,200 |
| 70 | 2018 | $54,500 |
| 71 | 2017 | $52,000 |
| 72 and above | 2016 or earlier | $49,800 |
Source: CPF
Being a parent is one of the toughest jobs in the world. But as we know it, being a parent has its own rewards. Among those rewards is tax relief for parents!
Did you know that for every child that you have, you can reduce your taxable income by $4,000? This applies for both parents, not just one of you. This falls under the Qualifying Child Relief.
If you are a working mother, you get extra tax relief under the Working Mother’s Child Relief. The more children you have, the more you get to deduct from your taxable income. Do note that for children born after 1st January 2024, the calculation for Working Mother’s Child Relief will be different.
Whether the new relief calculation benefits you more or not depends on how much you are earning.
| Child order | Working Mother’s Child Relief amount
For children born before 1st Jan 2024 |
Working Mother’s Child Relief amount For children born on/after 1st Jan 2024 |
| 1st | 15% of mother’s earned income | $8,000 |
| 2nd | 20% of mother’s earned income | $10,000 |
| 3rd and beyond | 25% of mother’s earned income | $12,000 |
Source: IRAS
On top of the two mentioned above, you can also qualify for the Parenthood Tax Rebate. The Parenthood Tax Rebate is split between BOTH parents, based on any proportion that you like.
For example, 40% can be claimed by your husband with the remaining 60% claimed on your own income. As long as the total percentage adds up to 100%, IRAS will agree to it.
| Child order | Parenthood Tax Rebate (For child born in 2004 to 2007) |
Parenthood Tax Rebate (For child born from 2008 onwards) |
| 1st | $0 | $5,000 |
| 2nd | $10,000 | $10,000 |
| 3rd | $20,000 | $20,000 |
| 4th | $20,000 | $20,000 |
| 5th and subsequent child | $0 | $20,000 per child |
Source: IRAS
With an ageing population, taking care of our parents will become part of our lives. Therefore, to encourage and incentivise Singaporeans to be more active in taking care of your own parents, you get a Parent Relief if you take care of either your own parents, grandparents, your in-laws, or grandparent-in-laws.
However, this will only apply to parents who are earning less than $4,000 a year, i.e. those who are retired.
The amount that you can claim will depend on whether you are staying with them or not. You can also claim for only maximum of two dependants. So you can’t claim Parent Relief for your all four of your parents AND in-laws.
| Type of Parent Relief | Parent Relief | Handicapped Parent Relief |
| Taxpayer stays with dependant | $9,000 per dependant | $14,000 per dependant |
| Taxpayer does not stay with dependant | $5,500 per dependant | $10,000 per dependant |
Source: IRAS
Among our list of tax relief hacks, we think this is one of the must-dos.
The condition to satisfy this tax relief is simple. All you need to do is to pay for the insurance premiums on your OWN life insurance policy. If you do, whatever insurance premium that you pay can be deducted from your taxable income. For married men, you may also claim the insurance premiums paid on your wife’s life insurance policy.
And here’s why we think this is a must-do for every taxpayer in Singapore.
Almost everyone needs life insurance to financially protect your loved ones. This is especially if you have dependents that you need to look after. Since you are going to be spending that money anyway, why not make full use of the tax benefits?
The other thing is that you can combine your life insurance with some investment element. Part of the insurance premium that you pay can be managed by your insurer to generate higher returns. While you are saving on your income tax, you are growing your savings at the same time by investing it with your insurer.
Tip: Don’t have a life insurance policy yet? Need advice on which life insurance policy is suitable for your profile and financial needs? Get a free comprehensive financial planning from Moneyline.
Comments are closed.
1 Comment