How to reduce tax and have I claimed all my reliefs
Paying taxes are part of the financial ecosystem in all civilization with no exception to Singapore. It is afterall the duty of every citizen to contribute to funds so vital for nation building. Without tax, it will be difficult for the government to move forward any plans to improve the standard of living in the long run. So why even consider reducing your tax contribution? Before you get a different thought, no this isn’t an article about tax evasion tips. Instead, personal reliefs in taxes are granted in different ways by the Singapore government as their way of recognizing that everyone has a different level of financial commitment.
If you aren’t already doing it, charitable donations is one way that you can reduce your tax. Instead of penalizing folks who have given a portion of their income for a good cause and in the spirit of community building, the government deducts your contribution amount from your statutory income thus reducing your assessable income taxable. Don’t forget to make sure that the charity organization is license (in Singapore) to be eligible. In fact till December 2018, the government has increased the amount deductible to be 250% of your donations to support this.
Depending on who you speak to, you may get differing views the function of CPF and how useful it really is for a Singaporean. Most salaried working Singaporeans do not even contemplate the idea of contributing more than what is required (or already deducted) because that leaves them with a smaller disposable paycheck. Unbeknownst to many, voluntary CPF top-ups offer a tax relief avenue because the government deducts a dollar for each dollar cash that you top-up into your CPF account or your family members. This is an interesting way to not only save on your taxes, but a great way to save your money (since the money will most likely be in the bank, why not the safest bank in Singapore?). In fact it’s such a great idea the government capped this at $14,000 with $7,000 for top-ups to your personal CPF and an additional $7,000 top-ups on behalf for family members.
Another retirement initiative supported by the government in tax relief are supplementary retirement schemes or SRS. Self explanatory in the term, SRS is intended to continue where CPF stops and since CPF are mainly for basic needs such as medical and housing, SRS is managed privately and is voluntary to each individual's choice. The government offers a tax relief for contributions to SRS at a cap $15,300. In 2018 most recently, the Singapore government has allowed the use of SRS to buy Singapore Savings Bonds, giving a wider range of low-cost products for the SRS platform.
All personal tax reliefs are capped at $80,000 per year of assessment (YA) which can be substantial. We are lucky that in Singapore, that government has many channels to provide tax relief and you should consider spending more time in understanding the various tax reliefs and rebates. Eventually, taking advantage of these initiatives should not be seen as “evading” and we shouldn’t go all out to get the reliefs. Proper planning and rational judgement should always be applied first since these are voluntary and not refundable. Always consider seeking the advice of a qualified financial advisor as a first or second opinion to understand the latest on tax reliefs or on the latest products for SRS before making any choices. In the long run, you may find that a little investment of time to speak with them can reap a large reward.
