About 2.25 million taxpayers would have received a notification by now from the Inland Revenue Authority of Singapore (Iras) on their filing. The good news for 1.5 million is that they benefit from the no-filing service. Taxpayers selected for the service get their tax bill without having to submit a return.
But for everyone else, note that to avoid late-filing penalties, paper returns have to be submitted by April 15 while e-filers have until April 18. Taxpayers should understand the different types of deductions they can claim to reduce their tax.
Take spouse relief. This allows you to claim up to $2,000 for your spouse if his/her annual income did not exceed $4,000 in the previous year. And if you have topped up your Central Provident Fund (CPF) Special or Retirement Account or made a charitable donation, be sure to make claims for them. When planning your tax reliefs, note that there is a total personal income tax relief cap of $80,000.
The Sunday Times highlights eight ways individuals can pay less tax by maximising reliefs. You do not need to make claims for items five to eight as the deductions will be automatically included in your tax assessments based on your contributions last year.
For more information on qualifying conditions and other reliefs, visit here.
1. Reliefs and rebates for taxpayers with children
Qualifying Child Relief (QCR)/ Handicapped Child Relief (HCR)/ Parenthood Tax Rebate (PTR)
Parents can claim QCR of $4,000 per child or HCR of $7,500 per child, which can be shared between the husband and wife.
The PTR is a one-off claim parents can make after the child is born. It allows taxpayers to claim rebates ranging from $5,000 to $20,000 per child, depending on the child’s birth order.
Working Mother's Child Relief (WMCR)/Foreign Maid Levy Relief/ Grandparent Caregiver Relief
A working mother can enjoy WMCR ranging from 15 per cent for her first child, to 20 per cent for her second child, to 25 per cent per third and subsequent child, of her earned income. Note that QCR or HCR plus WMCR is capped at $50,000 per child.
The child has to be below 16 years old or studying full time at any university, college or educational institution at any time last year, and the child should not have earned an annual income exceeding $4,000 last year.
Annual income includes taxable income (for example, from trade, employment, national service allowances and rental); tax-exempt income (such as bank interest, dividends and pensions); foreign-sourced income (regardless of whether it has been remitted to Singapore); and income from internships and attachments.
If working mothers have a foreign domestic worker or their parents/ grandparents/parents-in-law/grandparents-in-law are taking care of the children, they can also claim Foreign Maid Levy Relief and Grandparent Caregiver Relief (GCR).
For GCR, you will need to satisfy the condition of being a working mother who is married, divorced or widowed. Another condition is that your parent, grandparent, parent-in-law or grandparent-in-law (including that of your former spouse) was living in Singapore last year. In the case of a foreign dependant, generally, if he lived in Singapore for at least eight months last year, he will be regarded as living here.
You qualify if any of your children is a Singapore citizen, was 12 years old and below last year, and the caregiver was not working or carrying on any trade, business, profession or vocation last year. One condition is that no one else has claimed GCR on the same caregiver.
2. Parent Relief/ Handicapped Parent Relief
If you had supported your parents (or grandparents, great-grandparents including in-laws) last year, you can claim tax relief.
If your dependant stays with you, you can claim a dollar-for-dollar tax relief of up to $9,000. If your dependent does not stay with you, you can claim a tax relief of up to $5,500. You may claim Parent Relief/Handicapped Parent Relief for only up to two dependants. You may also share the tax relief if more than one individual is looking after the same dependant.
Let's assume your father, who has no income, lives with your two brothers. Last year, all three of you looked after him. You and your brothers can share the claim equally or based on an agreed amount, like $3,000 each. Alternatively, the three of you can choose to claim $6,000, $2,000 and $1,000.
To qualify for this relief, your dependant cannot have had annual income exceeding $4,000 for last year. Income includes tax-exempt income such as that from pension schemes, dividends or bank interest. The income threshold is not applicable for handicapped dependants.
3. Course fees relief
If you paid fees last year for a course, seminar or conference that led you to an approved academic, professional or vocational qualification, or is relevant to your current profession, be sure to claim the course fees you paid up to a maximum of $5,500 for the year. This also covers test, examination, enrolment and tuition fees.
Let's say you paid $9,000 for a three-year course last year. Since you can make claims up to a maximum of $5,500 a year, you can claim $3,000 a year for Years of Assessment 2018, 2019 and 2020. This is because if a course spans a number of years and where full payment has been made upfront, you can divide the course fees equally over the years.
For example, if you are an engineer by profession and took up a baking course, the Course Fees Relief will not be applicable as the course does not relate to your profession. However, if you choose to quit your job and open a bakery, you will be allowed to claim Course Fees Relief within two years of the course.
The Iras says you can claim only the portion of course fees. Any amount paid or reimbursed by your employer or any other organisation cannot be claimed.
4. Tax savings for landlords
You can claim tax deductions for expenses incurred solely for producing the rental income during the period of tenancy. You may opt to claim actual rental expenses on your tenanted residential property, or choose to claim an amount of deemed rental expenses calculated based on 15 per cent of the gross rent.
Allowable rental expenses include property tax, fire insurance, repairs, maintenance, costs of securing tenant, costs of supervision or management fees, furniture and fittings, Internet charges/expenses and utility expenses. Terms and conditions apply.
To simplify filing obligations, the Iras has pre-filled the rental expenses for your tenanted residential properties based on 15 per cent of the gross annual rent. If you wish to claim the actual expenses incurred instead, you can fill in the actual deductible expenses when filing your taxes.
On top of the deemed or actual expense, landlords can claim the mortgage interest expense against their rental income. If you rented out the property for only part of the year, report the rental income received for that period.
5. Contribute to Supplementary Retirement Scheme (SRS)
If you are a Singapore citizen or permanent resident and made contributions to the SRS last year, your contributions of up to $15,300 will be eligible for tax relief. For foreigners, the cap is $35,700.
The SRS is a voluntary savings programme that encourages you to save on taxes and make investments to grow your retirement savings, over and above your CPF contributions.
How to do it
To reap tax benefits for the 2019 tax season, open an SRS account with any of the three SRS operators – DBS Bank, OCBC Bank or United Overseas Bank – and make a contribution by the end of this year. Only half of your withdrawals from SRS would be taxable at retirement. However, withdrawals before the age of 62 will be subjected to a 5 per cent penalty.
If you made cash donations to an approved Institution of a Public Character last year, you will enjoy a tax relief of 250 per cent of the amount you donated. So if you donated $9,000, you would be eligible for a tax deduction of $22,500 ($9,000 x 250 per cent).
Check out the list of approved charities.
7. Make a voluntary contribution (VC) to Medisave
If you have made voluntary contributions to your Medisave account before the end of last year, you may be eligible for tax relief in the current year of assessment. Whether you are working as an employee or self-employed, you can make contributions to your Medisave account up to the CPF annual limit of $37,740.
For example, if your wages for the year total $80,000, your total compulsory contributions at the employer (17 per cent) and employee (20 per cent) rates would amount to $13,600 and $16,000 respectively. If you like, you can make a VC of $8,140. Your CPF relief would then amount to $24,140 ($16,000 + $8,140).
The overall personal income tax relief is capped at $80,000, so it is prudent to evaluate if you would benefit from tax relief before making voluntary contributions as refunds cannot be made.
VC to the Medisave account is subject to the CPF annual limit or the CPF member's Basic Healthcare Sum (BHS), whichever is lower. If the member's BHS is reached, no further VC to Medisave can be made.
8. Top up Special or Retirement Account for yourself and your family
If you have used cash to top up your CPF Special or Retirement Accounts or those of your family members last year, you will be eligible for tax relief. However, to claim tax relief for cash top-ups for your family member, the member must not have had an annual income exceeding $4,000 in the year preceding the year of top-up. Other conditions apply.
The maximum CPF cash top-up relief per year is $7,000 for yourself and another $7,000 for family members.
For example, if you want to top up $5,000 in cash to your own CPF Special Account and $10,000 to your mother's CPF Retirement Account to enjoy tax relief, you can claim a total CPF cash top-up relief of $12,000.
The relief does not apply when the top-up is carried out by transferring funds from your own CPF account to your own or a family member's Special/Retirement Account.
If you are planning to make a top-up this year, it will be eligible for tax relief next year.
Need help with filing?
You can file your taxes on the go at myTax Portal. If you need assistance, contact Iras via:
- AskJamie, your virtual assistant on tax filing matters
- Log on to mytax.iras.gov.sg to send an e-mail
- Call 1800-356-8300 or chat online (Mondays to Fridays, 8am to 5pm)
- Make an appointment with Iras (at least two working days in advance)
Source: The Sunday Times © Singapore Press Holdings Limited. Permission required for reproduction