Changes for personal tax have been made to the recent budget in Singapore. The changes affect Personal tax rebate, tax rates and contribution rates for older workers.Personal tax rebate
It was announced that a one-off personal income tax rebate of 50%, capped at $1,000, for resident individual taxpayers for YA 2015 should be granted.
Changes in personal tax rates
Currently, the top marginal personal income tax rate in respect of resident individual taxpayers is 20% for income exceeding $320,000.
The following changes to the personal income tax rates were announced:
1.a more progressive personal income tax rate structure for resident individual taxpayers effective from YA 2017, with the increase in the marginal tax rates for income exceeding $160,000.
2.an increase in the top marginal personal income tax rate from 20% to 22% for income exceeding $320,000 effective from YA 2017.
Changes related to CPF
Currently, CPF contribution is subject to a monthly salary ceiling of $5,000 and an annual total wage ceiling of $85,000.
The following changes have been proposed with effect 1 January 2016:
To raise the CPF monthly salary ceiling to $6,000. With this proposed increase, the CPF annual total wage ceiling will be raised to $102,000.
The existing limits on tax deduction for employers’ statutory CPF contributions and tax relief for employees’ CPF contributions will be raised accordingly.
Changes to CPF contribution rates for older workers
The CPF contribution rates for older workers were lowered in the past to enhance their employability. With effect 1 January 2016, the Minister has now proposed that the CPF contribution rates for workers
aged 50 to 65 years and earning $750 per month or more be increased as follows:
- for workers who are above 50 to 55 years old, the employer and employee CPF contribution rates will be increased by 1% to 17% and 20% respectively. This will restore the contribution rates for employees under this age group to the same level as those of younger workers;
- for workers who are above 55 to 60 years old, the employer CPF contribution rate will be increased by 1% to 13%; and
- for workers who are above 60 to 65 years old, the employer CPF contribution rate will be increased by 0.5% to 9%. The increase in employer contribution rates will go to the worker’s Special Account whereas the increase in employee contribution rates will go to the worker’s Ordinary Account.
Increasing the contribution cap for the Supplementary Retirement Scheme (SRS)
Currently, both an individual and his employer can contribute to the individual’s SRS account up to the prevailing statutory retirement age, subject to a contribution limit of $12,750 per year for Singapore citizen/SPR employees and $29,750 per year for foreign employees. With the increase in the CPF salary ceiling as proposed by the Minister from $5,000 to $6,000 per month, the contribution cap for the SRS will also be raised.
The revised income base computed at 17 months of monthly salary ceiling for CPF will be $102,000 (17 x $6,000).
The revised SRS contribution limits per year for a Singapore citizen/SPR employee and foreign employee will be $15,300 (15% x $102,000) and $35,700 (35% x $102,000) respectively.
The existing limits on tax relief for SRS contributions will also be raised accordingly. Effective date: 1 January 2016 Allowing individual taxpayers to claim a specified amount of expenses against his rental income derived from residential properties in Singapore Currently, an individual who derives passive rental income from a residential property in Singapore can, subject to income tax rules,claim against such income a deduction of the actual deductible expenses incurred in producing that income. To substantiate the claim for deduction of expenses, he is required to keep the relevant records for a period of at least 5 years from the YA to which the claims relate.
With effect YA 2016 the Minister has proposed that an individual who derives passive rental income from the letting of a residential property in Singapore (referred to as “qualifying rental income”) can, in lieu of claiming the actual amount of deductible expenses incurred (excluding interest expenses) against his qualifying rental income, claim a specified amount of expenses as a proxy for the deductible expenses (determined based on 15% of the gross rental income derived from that residential property). The individual can continue to deduct against his qualifying rental income, any deductible interest expense. This tax change does not apply to any rental income derived:
1. by an individual through a partnership in Singapore; and
2. from a trust property.
IRAS will release further details by May 2015.