We’re approaching the end of 2023 for income-earning individuals in Singapore and that, of course, means taking stock of how we can reduce that pesky tax bill.
Remember, the tax year in Singapore follows the calendar year (so 1 January to 31 December) so certain deductions or savings on our tax need to be banked before 2024 rolls around.
Remember, for each year of assessment there’s a personal income tax relief cap of S$80,000. That amount applies to the total of all tax reliefs claimed.
Given we probably don’t want to give more money to the Inland Revenue Authority of Singapore (IRAS) than we need to, here are five of the best ways to save on your Singapore income tax before 2024.
1) CPF cash top-ups for you and family
The Central Provident Fund (CPF) is a great system for Singaporean citizens and Permanent Residents (PRs) to save for their retirement.
But did you also know that you can save on income tax by voluntarily topping it up? If you make a voluntary cash contribution to your CPF then you can claim relief on up to S$8,000.
That same S$8,000 figure also applies to another family member, such as parents, parents-in-law, grandparents, and grandparents-in-law.
But for contributions to a sibling or spouse, they’ll need to have not made more than S$4,000 in the previous year. So, it’s best to stick to contributing to parents’ and grandparents’ CPF accounts.
2) Supplementary Retirement Scheme (SRS) contributions
As I’ve written about before, the SRS is a great way for any Singapore resident to save on tax while investing for retirement.
Just remember that the relief contribution cap for Singapore citizens and PRs is S$15,300 per year while for foreigners it’s a much higher S$35,700 – since they don’t have CPF.
You can open an SRS account with any one of the big three banks – UOB, OCBC, and DBS – and if you’re a foreigner, you’ll need to submit an annual declaration of your residency status to ensure you’re given the higher contribution cap.
One last thing on the SRS. Individuals should definitely invest the money that is put into the SRS as the account itself offers a pathetic 0.05% interest rate on any idle cash that happens to sit there.
3) Life insurance relief
Here’s a little-known tax relief hack – payments for life insurance. This obviously comes with a caveat, though.
You can claim tax relief on any life insurance premiums, granted your total compulsory + voluntary CPF contributions during the year of assessment (YA) was less than S$5,000.
So, this seems to be more for foreigners (who don’t have CPF) as well as lower-earning Singaporeans who didn’t exceed the S$5,000 CPF cap.
4) Qualifying and Working Mother’s Child Relief
This is a key tax relief benefit for women, whether they be Singaporean, PR or a foreigner.
For Working Mother’s Child Relief (WMCR), this applies to those working women who have children that are Singapore citizens.
In this case, the tax relief can be super generous – at 15% of the mother’s earned income for the first child, 20% of her earned income for two children, and 25% of her earned income for three children or more.
The Qualifying Child Relief (QCR) is more applicable to foreigners and PRs. That’s because it’s open to everyone and as long as you’re a working woman in Singapore, you can claim QCR of S$4,000 per child.
Do remember, though, that the total cap of QCR + WMCR is S$50,000 per child. This cap is more relevant to those with children who are Singapore citizens.
5) Foreign Domestic Worker Levy Relief
If you and your spouse both work in Singapore and have young kids, then there’s a good chance you have a foreign domestic helper.
Given you have to pay a Foreign Domestic Worker Levy (FDWL) every month (S$300 per month for foreigners and PRs and $60 per month for Singapore citizens), it’s good to know you can claim tax relief on those payments.
The best thing is you can claim double the amount that you pay in a year for the levy.
So, say you pay S$300 a month for the FDWL, you can claim tax relief of S$7,200 (2 x S$3,600).
For the concessionary rate for Singapore citizens, you can claim tax relief of S$1,440 (2 x S$720).
Every little helps on Singapore’s tax scene
For all of us living and working in Singapore, we know how expensive the city state is.
If we can at all avoid paying any more tax than necessary – legally! – to the Singapore government, then we should take advantage of what’s on offer.
With CPF cash top-ups, SRS contributions, life insurance relief, QCR + WMCR, and the Foreign Domestic Worker Levy relief, we have five great ways to save on tax for YA2023.