2019 is finally coming to an end and we are finally moving into the next decade!
Before we go for the holidays and call it a day (year?), I think it would be timely to reflect and see if we have maximised our personal tax relief.
Budget 2019 is a historical one. It was the first budget tabled by the Pakatan Harapan government. However, in terms of personal tax reliefs, there are not many changes. In this article, I will first highlight the major difference between YA2018 and YA2019, then I will share some common expenses that are eligible for tax reliefs. (Spoiler: I also compared against Budget 2020 and included an additional relief for YA2020, so be sure to read till the end.)
1. Skim Simpanan Pendidikan Nasional (SSPN-i)
If you are a parent with young children, you may want to save some money into SSPN-i. SSPN-i is a government initiative to encourage Malaysians to save money for their children’s education fund. In budget 2019, the government increased the tax relief from RM6,000 to RM8,000 for the net amount deposited into SSPN-i.
This is a substantial amount and it may potentially lower your tax bracket, and therefore lowering tax payable for YA2019.
However, this relief will not last forever. In Appendix 7, Budget 2019, it was mentioned that we only have 2 years left to claim for the relief, i.e. YA2019 and YA2020. So if you want to save some money on tax, this is the time to start saving into SSPN-i. (If you are unsure how to start planning for your children’s education, you may drop me a message here, I’m happy to answer.)
2. Takaful or payment of life insurance
Previously, the tax relief for the contributions to EPF and payments for takaful or life insurance premium are combined. If your basic income is RM4,600 per month and contribute 11% of your salary to EPF, you will not gained any additional relief from the payments for takaful or life insurance premium.
RM4,600 x 11% x 12 months = RM6,072 (capped at RM6,000)
With effect from YA2019, tax relief for contributions to EPF is now separated from the payments for takaful or life insurance premium. Relief of up to RM4,000 is given on the contributions to EPF. In addition, payments for takaful or life insurance premiums are eligible for a tax relief of up to RM3,000. This results an increase of tax relief from previous years.
If you are a…
Salaried Worker / Business Owner / Sole Proprietor / Freelancer / Civil Servant contributing to EPF
You can maximise your tax relief by getting takaful or life insurance. (Please, please, don’t get any saving plan, unless you’re super wealthy). You can easily get one of these commission-free direct term plans that provides a good coverage at a relatively low rate.
However, if you are a…
Civil Servant under the pension scheme
The tax relief will remain combined and up to RM7,000. So if you are not contributing to EPF, I highly suggest that you do. Just in case you are wondering, yes, you can contribute to EPF. However, before you contribute to EPF, make sure you have adequate insurance coverage.
(I also offer insurance advisory, but as a financial planner, I charge a fee for insurance review. You may find out more about my service HERE.)
Other Notable Reliefs
3. Private Retirement Scheme / Annuity Premium
Tax relief of RM3,000 is given on contributions made to private retirement schemes approved by the Securities Commission of Malaysia. This is applicable to YA2021.
4. Insurance premiums for education or medical benefits
Duh. If you do not claim for this relief, I want to have a word with you.
5. Fees for acquiring skills and knowledge
If you plan to further study at post graduate level, in any institution or professional body approved by the Ministry of Finance, you are entitled a tax relief of RM7,000.
6. Lifestyle Reliefs
You are entitled to a maximum of RM2,500 (combined) tax relief for the following:
- purchase of books, journals, magazines, printed daily newspapers and other similar publications (excluding banned publications);
- purchase of sports equipment;
- purchase of computer, smartphone or tablet;
- subscription for broadband internet; and
- gymnasium membership fee
7. Breastfeeding equipment
A relief of up to RM1,000 is given for the purchase of breastfeeding equipment. However, do note that this relief is only applicable to working women with children of 2 years or younger and can be claimed once every 2 years.
8. Childcare centres and kindergartens
A relief of up to RM1,000 is given to individual taxpayers who enrol their children up to 6 years of age, in child care centres or kindergartens registered with the Department of Social Welfare or the Ministry of Education.
As promised, I also looked into Budget 2020 to give you the comparisons between YA2019 and YA2020. Frankly speaking, there are not many changes. The only changes in the tax relief is the increase of relief for “Child care centres and kindergartens”, from RM1,000 to RM2,000.
So there you have it, it is still not too late on maximising your tax reliefs. I hope this helps. Let me know if you have any burning questions about personal finance and I will do my best to conduct a research and write it out for you.