Greetings everyone!
SIFE Taylor’s University Finance Department brings this community message to you J
Income Tax Relief Tips
Live the lifestyle you desire by managing
your income tax payments
Income tax time is coming soon. It is the season where employees
and business owners try to maximize their income tax deductions. Here are a few
simple income tax relief tips especially for resident individuals that you can
leverage on for noteworthy income tax savings. Read on to find out how you may
reduce your income tax liability by saving for retirement, owning a home and
funding your children’s education!
1. Negotiate
for the ‘CEO’ packages
If you are
earning at least RM10, 000 per month and are paying income taxes at the highest
bracket (26%), the following methods may be helpful in reducing your income tax
liability. You may start by exploring opportunities to discuss and customize
your remuneration package with your employer.
Consider
converting your gross income into benefit-in-Kind (bIK)
The ‘CEO’ package is a tongue-in-cheek reference to the non-
monetary perks that a CEO may typically receive. For example, negotiate your
remuneration package to include BIKs such as a company car, reasonable amount
of travel benefits, telephone Bill subsidy and so forth, which will result in
reduced chargeable income. Although BIKs are still considered income and
taxable, the taxable value of BIKs may be lower compared to receiving the
amount in cash. For example a car valued between RM150, 001 to RM200, 000 may
incur BIK taxes at RM8, 800 per annum compared to the RM52, 000 (RM200, 000 x
26%) you may have to pay if you were to receive RM200, 000 as an income.
Consider
negotiating for travel allowances
An employee is provided an income tax exemption of up to RM6, 000
per annum for any travel allowance, petrol card, petrol allowance or toll
payment or any of its combination for work related travel.
2. Buy a home
If you purchased
a residential property and signed a Sale and Purchase Agreement between 10th
March 2009 and 31st December 2010, you will enjoy up to RM10, 000 income tax
relief on interest expended to finance the purchase, for three consecutive
years from the first year the interest is paid. That means, if you purchased a
house in 2010, you will receive RM10, 000 income tax relief yearly from 2010 to
2012. If more than one person jointly purchased the property, all of them are
entitled for the relief up to a maximum of RM10, 000 jointly. For instance, if
David and his wife jointly purchased a property, they will both be entitled to
a relief of RM5, 000 each for 3 consecutive years.
3. Send your
child to college
Start saving for your child’s education and qualify for income tax
relief on education savings and education fees at the same time.
RM3, 000 income tax relief for child’s education savings (Skim
Simpanan Pendidikan nasional, SSPn)
Any amount that is deposited into a savings account for your child
under SSPN allows you to claim for income tax deduction up to a maximum of RM3,
000 per annum. If your spouse files a separate income tax return, he or she can
also claim this amount. So jointly, if each spouse saves a net contribution of
RM3, 000 for their child per annum, the income tax relief chalks up to RM6,
000. If you and your spouse are paying income taxes at the highest bracket,
that would translate to a saving of RM1, 560 (RM6, 000 x 26%) per annum.
Enjoy child
relief on education fees
RM1, 000 for a child aged 18 years old and above, not married and
receiving full-time tertiary education and RM4, 000 for a child aged 18 years
old and above, not married and pursuing diplomas or above qualification in
Malaysia or Bachelor’s degree or above outside Malaysia in a Higher Education
Institute accredited by related Government authorities.
4. Start a
business
If you are an
entrepreneur or have a side business, you can claim deductions for all expenses
related to the business when calculating business income other than expenses
disallowed under the Income Tax Act 1967. For example, if you provide IT
consulting work on a part-time basis, you can claim an income tax deduction for
office rental, cost of stationery, printing material or training manuals. If
your spouse or family members are employed to help you in the business, their
salaries are also deductible.
They, however, will need to file personal income taxes for the
income received from you.
5. Invest in
yourself
Sharpening your skills is often the best investment you can make.
Plus, you get income tax relief for your efforts too.
Read as much
as you can
You will enjoy an income tax deduction of a maximum of RM1, 000 on
the purchase of books, journals, magazines and publications.
Further your
learning
Enjoy a relief of RM5, 000 per year for any course of study at the
Master’s or PhD level. The course does not have to be full time, but must be in
an institution or professional body in Malaysia recognized by the government or
approved by the Ministry of Finance.
Get fit
You may claim up to RM500 for a complete medical examination. To encourage
a healthier lifestyle, the government also allows claims of up to RM300 each
year for the purchase of any sports or exercise equipment for any sports
activity (Sports equipment does not include attire and shoes). Now that’s an
incentive to start exercising.
6. Invest in
income tax-efficient instruments
Look for investments that offer lower income tax rates to enjoy
greater income tax savings.
Real Estate
Investment trusts (REIt)
Invest in REITs to enjoy concessionary income tax rate of 10% as
opposed to dividends on normal shares that are taxed at 25%. Since the REIT
distributions you receive are already subjected to the 10% tax, you are not
required to declare the amount in your income tax return.
Invest in
overseas stocks with lower corporate income tax
Corporate income tax rate in some countries may be lower (eg. 17%
in Singapore compared to Malaysia’s 25%), which may mean you save on income
taxes. As the income is already taxed in the country of origin, it will be
tax-free when repatriated back to Malaysia.
7. Save for your retirement
Sign-up for a Deferred Annuity Retirement Scheme to enjoy an
income tax relief of RM3, 000 annually on premiums paid.
For instance, if you sign up for a new annuity scheme (including
Private Retirement Schemes approved by the Securities Commission) in 2012 and
pay RM3, 000 in premiums, you can claim RM3,000 for income tax deduction the
next year. Should you be at the 26% income tax bracket, you would have made a
saving of RM780. Better yet, and you would have also invested in your future.
All the best in managing your personal income taxes J
Best Regards,
Aaron Lee
Vice - President of Finance
SIFE Taylor's University
