Proper tax planning is crucial for Singapore tax residents to optimize their financial management and reduce their tax burden. By taking advantage of various tax reliefs, contributions to retirement schemes, and making strategic financial decisions, individuals can maximize their tax savings. In this article, we provide basic tips for Singapore tax residents to consider when planning their taxes and aim to minimize their personal tax liabilities.
Claim Applicable Tax Reliefs and Rebates
Singapore offers several tax reliefs and rebates to eligible individuals. These reliefs recognize contributions in areas aligned with the government’s policies, such as parenthood, family formation, education, and caregiving. Common reliefs include spouse relief, child relief, parent relief, earned income relief, and foreign maid levy relief. Understanding and claiming these reliefs can significantly reduce your taxable income and overall tax liability.
Top-up Your CPF (Central Provident Fund)
The CPF Minimum Sum Topping-Up Scheme allows you to claim tax relief when you top-up your CPF savings. You can also receive the relief if the top-up is made by your employer. Consider making cash top-ups below S$7,000 or S$7,000 and above to maximize your tax relief. Additionally, you can make top-ups to the CPF accounts of eligible family members, such as siblings, parents, and grandparents, to claim additional relief.
Contribute to SRS (Supplementary Retirement Scheme)
The Supplementary Retirement Scheme (SRS) encourages individuals to save for retirement beyond their CPF savings. Contributions to SRS are eligible for tax relief and investment returns are tax-free until withdrawal. By contributing to SRS, you can reduce your chargeable income and enjoy tax savings. Note the maximum contribution limits based on your residency status.
Voluntary Contribution to Your Medisave Account
Consider making voluntary contributions to your Medisave Account to enjoy tax relief while saving for healthcare needs. The relief for voluntary Medisave contributions is subject to certain limits, including the annual CPF limit, mandatory contributions, and the prevailing Medisave Contribution Ceiling.
Make a Charitable Donation
Donations made to approved Institutions of Public Character (IPC) or Qualifying Grant-making Philanthropic Organizations are tax-deductible in Singapore. By making charitable donations, you not only contribute to a good cause but also enjoy substantial tax deductions. Check the eligibility criteria and the specific tax deduction rates for different types of donations.
Consider the Not Ordinarily Resident (NOR) Scheme
If you meet the criteria for the Not Ordinarily Resident (NOR) scheme, you can enjoy tax benefits for up to five years of assessment. To qualify, you must meet specific residency conditions, including not being in Singapore for three years prior to the year you apply for the NOR scheme.
Deduct Rental Expenses from Rental Income
If you earn rental income, remember that associated expenses can be deducted. These may include property tax, mortgage interest, insurance, maintenance fees, and repair costs incurred solely for the purpose of generating rental income. Keep proper records and ensure the expenses are related to the rental property.
Reducing personal taxes requires careful planning and consideration of various strategies available within the Singapore tax framework. By claiming applicable tax reliefs, making CPF and SRS contributions, and exploring other tax-saving avenues, individuals can optimize their tax position and increase their disposable income. It is recommended to seek advice from a Singapore tax specialist for personalized tax planning tailored to your specific circumstances.