Understanding the latest Singapore income tax reliefs (2024)
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Understanding the latest Singapore income tax reliefs (2024)

Updated
15
Mar 2024
published
4
Dec 2020
Understanding income tax reliefs in Singapore

While Singapore has one of the lowest personal income tax rates in the world, income tax can still be a significant expense for middle and high-income earners.

Many of them are considering using Supplementary Retirement Scheme (SRS) contributions or CPF top-ups to increase their personal relief, and consequently lower their taxable income. A key concern is that their existing tax reliefs may already exceed the personal income tax relief cap of $80,000, and make any additional relief contribution efforts pointless.

In this article, you will get to understand how to estimate your current tax relief through Inland Revenue Authority of Singapore (IRAS) submissions, so that you can make an informed decision around discretionary relief contributions, such as SRS contributions and CPF top-ups.

As it is currently tax season, this article will be useful for you when you file your taxes. You can begin filing for the Year of Assessment (YA) 2024 starting from 1 March. Please be aware that YA2024 pertains to the assessment of income earned between 1 January 2023 and 31 December 2023.

Source: IRAS

How to estimate your personal tax reliefs

Retrieving your previous income tax statement

The quick and easy way to estimate your current tax relief is to use your previous tax filing as a proxy for this year's tax.

You can log in to myTax portal at IRAS with Singpass. Under Notices/Letters > Individual, you will be able to access your previous income tax statement, known as the Notice of Assessment (NOA).

After you have downloaded your previous income tax statement/ NOA, look at your Total Personal Reliefs last year. This will form the basis of your tax relief estimate.

Adjusting for changes in your tax relief

Your tax benefits and deductions may change from your previous tax filing. The most common reasons are as follows:

  1. Increase in employee contributions of CPF, due to an increase in salary or bonus
  2. Being a parent makes you eligible for Qualifying Child Relief and Working Mother Child Relief
  3. Having more dependents, which would qualify you for relief such as the Parent/Grandparent relief or Handicapped Brother/Sister relief

Add or subtract any changes to these tax reliefs, and you will have a fairly reflective estimate of your current tax benefits.

Manually calculating your personal tax relief and deductions

To be more precise and accurate with your tax optimisation efforts, you should:

  1. Manually identify the different relief schemes that you are entitled to;
  2. Find out how much you are getting from the tax reliefs;
  3. Sum up all the reliefs you are getting.

The following are the key types of reliefs that are part of our entitlement.

Compulsory CPF Contribution-related Tax-relief

We are exempted from paying taxes for any compulsory CPF contribution that we make as employees. For example, a fresh graduate with a base salary of $3,000 and an annual income of $36,000 will have a tax relief of $7,200 for his CPF contributions of 20% each month.

Note that there is an Ordinary Wage (OW) ceiling cap for CPF contribution. For the YA2024, the monthly cap will be either $6,000 or $6,300, depending on the month. 

As announced in Budget 2023, the CPF monthly salary ceiling of $6,000 will be increased to $8,000 in four phases starting from 1 September 2023.  

Source: CPF Board

CPF tax relief is also extended to contributions from your annual bonus and leave pay. The additional Wage ceiling cap for CPF contribution is calculated based on the below formula:

Source: IRAS

If you are under 55 years old, the maximum tax relief that you can get from compulsory CPF contributions is  or $20,400, or 20% of the CPF annual salary ceiling of $102,000. More examples of how Additional Wage Ceiling CPF contributions can be found on the CPF website.

Child tax relief as a parent

With additional childcare-related expenses, lower tax expenses is definitely a relief for many working parents. Additional tax benefits are also given to working mothers.

There are two different schemes: Qualifying/Handicapped Child Relief and Working Mother Child Relief.

Qualifying Child Relief (QCR)/Handicapped Child Relief (HCR)

Parents may claim QCR/HCR if they are looking after an unmarried child who satisfies the following conditions: 

Source: IRAS

And here’s the amount of relief possible: 

Source: IRAS

Working Mother Child Relief (WMCR)

To qualify for WMCR, you must satisfy all of the following conditions: 

  1. A working mother who is married, divorced or widowed
  2. Have taxable earned income
  3. Have satisfied all conditions under QCR/HCR

The amount of relief you can claim for each child is based on the child order, as follows: 

table of tax reliefs for working mother child relief

Tax relief from QCR/HCR and WMCR combined is capped at $50,000 per child. 

Dependents tax reliefs

Having a spouse, parent, or grandparent who is under your care also allows you to be entitled to tax reliefs. You may even get Grandparent Caregiver Relief if your parent/grandparent is taking care of your child. The different schemes and the tax reliefs are tabulated below:

table of tax reliefs for dependent tax relief scheme

Note that there are various criteria that you should take note of before you assume that you are entitled to the relief.

For example, under the Parent Relief, your parent/grandparent cannot have made an annual income of more than $4,000. Similarly, to qualify for Spouse Relief, your spouse should not make an annual income of more than $4,000. However, from YA2025, the annual income threshold will increase to $8,000 each for both the above reliefs. It is important to refer to the relevant IRAS page for the latest information. Read more about the Handicapped Brother/Sister Relief here.

Other miscellaneous tax reliefs

You should also include the other key miscellaneous tax reliefs, or refer to IRAS for more information.

table of amount of tax reliefs for other miscellaneous tax relief schemes

IRAS provides a nifty tool to help you sieve out the various tax reliefs you may qualify for. All you have to do is select your details such as citizenship, gender, marital status, and employment status, and the tool will do the heavy lifting for you. 

Source: IRAS

Discretionary tax relief through CPF and SRS top-ups

Beyond the tax reliefs that were listed previously, you can also do voluntary CPF and SRS top-ups. These tax reliefs encourage Singapore tax residents to save up for retirement. 

Generally, topping up these accounts will give you a dollar-for-dollar income tax reduction, but your money will be locked up till retirement age for SRS or until the age of 55 for CPF.

We have listed out the pros and cons of topping up your  CPF and SRS accounts, and how should you decide between CPF and SRS. Start today with Endowus, manage and invest your CPF savings and maximise your retirement savings with your SRS account.

Personal income tax relief cap and using donations for tax reductions

Lastly, after you have identified the different tax reliefs that you are entitled to and summed up all the tax benefits you are getting, you will know the Total Personal Relief that you can get. As there is a maximum tax relief of $80,000, if you have $75,000 worth of Total Personal Relief before SRS contributions or CPF top-ups, you are entitled to $5,000 tax relief from your CPF and SRS  top-ups.

Beyond that, you should also consider what tax bracket you are in after all the tax reliefs you are entitled to. A young working female who earned $100,000 last year may find SRS contributions during the year worth it without a child, as she was in the 11.5% tax bracket. However, with the associated tax relief as a parent, she may find the tax savings at the 7% tax bracket less efficient when weighing the opportunity cost of liquidity.

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