How to reduce income tax in Singapore for an individual?

1) Generous Donations:

Have you ever thought of your social responsibilities to contribute to a charity to help the less fortunate? A cool tax relief of 2.5 times the amount of donation will be available for contributions made to charities which are approved Institute of Public Character (IPC). The list of approved IPC can be found at the Charity Portal: www.charities.gov.sg.

2) Course fee relief:

There is no barrier for upgrading yourself. Have you been procrastinating on going for that course which can give you an academic, professional or vocational qualification? If the course is relevant to your current or new employment, now is the time to sign up for that course!

You will be able to claim a deduction of up to S$5,500 of course fee relief against your earned income in 2018 if the fees were paid in 2018.

3) CPF Cash Top-up (self) Relief:

Guaranteed Interest from CPF: Are you aware that your CPF special account is one of the best ways to save for your retirement? With a guaranteed interest rate of 5% per annum, it is one of the best savings plans you can find in the current low-interest rate economics.

Singapore Government is giving you a tax relief of up to S$7,000 in order to encourage Singaporeans to save more for their retirement, matching the cash top-up of your own special account. For Singaporeans 55 and above, the relief will also be provided when you top up your retirement account.

If you have not been saving much for your retirement, now is the time to deposit some cash into your CPF special or retirement account and reduce your tax liability for next year.

4) Parenthood tax rebate/Qualifying child relief/Working mother’s child relief:

Singapore government is strongly encouraging Singaporeans to have children by balancing the work and family. If you have recently welcomed a new born baby to your family this year, then our heartiest congratulations!

For new parents who are eligible for the above rebate and reliefs, please do remember to enter the particulars of your new born child when filing for your income tax next year. This will enable the IRAS to provide you with the necessary rebates and relief for this year.

5) CPF Cash Top-up (family members: parents, grandparents, spouse and / or siblings) Relief:

You could consider topping up the CPF retirement accounts of your parents and / or grandparents in addition to topping up your own CPF special or retirement account. The cash could go towards helping them with their retirement needs by reducing your tax burden.

If you have a spouse or siblings who do not have income exceeding S$4,000 in preceding year of the top up, topping up their CPF special/retirement account will grant you the same relief. The maximum relief provided here is S$7,000 which is similar to topping up your own CPF account.

The maximum about of relief you will be entitled is S$14,000 (S$7,000 self + S$7,000 family) when you have topped up both your own and your family member’s CPF special/retirement account.

6) Supplementary Retirement Scheme (SRS) relief:

Supplementary Retirement Scheme (SRS) : The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Contributions to SRS are eligible for tax relief. Investment returns are tax-free before withdrawal and only 50% of the withdrawals from SRS are taxable at retirement.

You are entitled to a SRS tax relief in the Year of Assessment (YA) following the year of contribution. However, you have to be assessed as a tax resident for that YA. Non-residents are not eligible for any tax relief.

Hence you may wish to consider opening an SRS account with one of the local banks. Contributions made to your SRS account will qualify you for tax relief of up to S$15,300. The contribution should be made before the end of this year to qualify for the relief on your current year’s income.

Furthermore, as part of the SRS, only 50% of the withdrawal amount made at or after the official retirement age will be taxed (i.e. only S$50,000/- will be subject to tax if S$100,000/- was withdrawn). Withdrawals from the SRS account prior to retirement age will, however, be subject to tax in full.

Take note of your personal income tax relief cap of S$80,000 from YA 2018:

·         When planning to utilise all available reliefs, please take note that there is a personal income tax relief cap of S$80,000.

·         The excess amount will not be available for you to reduce your taxable income earned in preceding year when you are exceeding the tax relief of S$80,000. The excess will also not be carried forward to next year and will be disregarded.

·         Proudly, the high-income earning women with two or more children should take note of this as the Working Mother’s Child Relief (WMCR) accorded to them are rather generous and may cause them to hit the tax relief cap even without considering other forms of tax relief.

·         Also bear in mind that the cap is on tax relief; tax rebates (e.g. parenthood tax rebate) are not included in the cap. Some of us may mistakenly include tax rebate in the calculation, and not claim the full amount of tax relief which are available.