How to reduce your income tax through CPF and SRS top-ups
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How to reduce your income tax through CPF and SRS top-ups

Nov 2022
Dec 2019
reducing income tax - cpf and srs

Singaporeans are embracing the move to top up their CPF and SRS funds.

In October 2022, it was reported that CPF top-ups in the first three quarters of 2022 have already hit a record high of more than $3.5 billion, exceeding that of the same period in 2021. With more SRS account holders today, the tally of SRS savings rose by $2.1 billion in 2021.

Given the rising popularity of such top-ups to retirement schemes in Singapore, here is a useful guide on the latest updates.

CPF top-up methods that give you income tax relief

There are many ways you can top up your CPF contribution, though not all can be tax deductible to reduce your taxable income. The tax relief methods recommended below are also constrained by the maximum personal tax relief of $80,000.

1. Topping up your parents' or spouse's CPF Retirement Account (RA) or Special Account (SA)

You can give your parents and spouse a mini CPF monetary gift by topping up their CPF account. If your parents are over 55 years old, and their CPF RA savings haven't exceeded the current Full Retirement Sum (FRS), you will be able to top up their account and enjoy tax savings.

If they are younger than 55 years old, their CPF SA must be at the current FRS after subtracting the sum of SA savings and net SA savings withdrawn for investments. That gives you the maximum amount of top-ups they can receive, and for which you get tax relief benefits.

To be eligible for tax relief for any CPF SA/RA top-up for your spouse, your spouse’s income in the previous year should not exceed $4,000.

The maximum tax relief you can get from topping up is now capped at $8,000, based on the latest CPF revisions.

Instead of giving your loved ones cash, topping up their CPF SA/RA savings can be a more thoughtful gesture, because not only will they get to enjoy a higher interest rate compared to a savings account, but it'll also help to increase their lifelong monthly payout through CPF Life. You can even borrow money from them and return it to them by topping up their SA/RA. Talk about maximising tax relief with no trade-offs.

2. Topping up your own CPF MediSave Account (CPF MA) or CPF SA

You can prioritise topping up your CPF MA over your CPF SA since you can use your CPF MA for various medical purposes and to pay the premiums of your hospitalisation policies, including MediShield Life/Integrated Shield Plans. 

You can also use it to pay for approved day surgeries such as wisdom tooth extractions, or approved chronic conditions such as asthma and psoriasis.

Similar to the tax relief for CPF top-ups for your loved ones, the maximum tax relief you can get from the CPF MA or SA top-up is $8,000 per annum.

SRS top-up method that gives you income tax relief

Topping up your Supplementary Retirement Scheme (SRS) account to lower taxable income

If you have been investing consistently and are comfortable with the volatility of the stock market, you can look at topping up your SRS account as well. You can also take greater risk with investing through SRS.

In the scenario where you really need the cash from SRS, you also have the option to withdraw it with a 5% penalty, and the amount withdrawn will be taxable.

How should you decide between CPF or SRS top-ups?

Which account to top up is highly subjective and is ultimately a very personal decision. Your age also affects the decision as well — if you are older, topping up SRS or even your CPF SA makes more sense because you have a shorter lock-in period.

Before topping up both accounts to maximise tax reliefs, note again that there is a maximum personal tax relief of $80,000. If you have a high CPF contribution from work (that is, tax relief up to $37,740) and other tax reliefs such as Working Mother Child Relief (WMCR), you will not get extra tax relief from these top-ups.

For those who are younger, you may prefer to top up the SRS account first because of the potential higher returns from SRS. A consistent, dollar cost average (DCA) approach for SRS investment (at no additional transactional cost through Endowus) will give you a better chance of hitting a 6% to 7% returns from investing in a 100% equity portfolio. You can check out the historical returns of the funds that we carry, and try playing around with the portfolio allocation. Investors who choose to do this would aim to grow their retirement savings faster than any CPF top-ups.

To be clear, there is value in having cash on hand versus having it locked up in CPF or SRS. As a rule of thumb, we would not recommend you to try to save on taxes if your obligations are below the 7% tax bracket, but again, if you are older, this consideration may change because the lock up period is shorter. Do note that since SRS is a tax deferral account, the more money you have in it, the more you may have to pay in taxes when you withdraw.

To get started with Endowus, click here.

Next on the Endowus Fin.Lit Academy

Read the next article in the curriculum: How you can help your parents better manage their CPF


This article is for information purposes only and should not be considered as an offer, solicitation or advice for the purchase or sale of any investment products. It is recommended that you seek financial advice as to the suitability of any investment. Whilst Pte. Ltd. (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance.

Please note that the above information does not purport to be all-inclusive or to contain all the information that you may need in order to make an informed decision. The information contained herein is not intended, and should not be construed, as legal, tax, regulatory, accounting or financial advice.

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