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Tax season is upon us again, and the deadline is coming up – people who are e-filing have to do so by 18 April 2018, while those who are paper filing have an earlier deadline of 15 April 2018. If it’s your very first time filing your taxes or you’re just not sure what reliefs you qualify for, allow us to run you through all the things you need to know so you can get started.
Every Singaporean resident has to pay tax on an annual basis, and the first question many people tend to ask is “How much do I need to pay?”. Singapore has a tiered system that charges tax based on your income. Simply put, the more you make, the more tax you have to pay. For the Year of Assessment (YA) 2017, resident tax rates can be found on the Inland Revenue Authority of Singapore’s (IRAS) website.
To figure out which tax bracket you fall into, just look at the “first” figures and slot your annual income within it. The table below is an excerpt from IRAS’ website.
For clarity on how the table works, let’s use a simple example. If you make S$42,000/year, the table states that the first $40,000 will be charged a flat rate of 550, and the next 40,000 will be charged a rate of 7%. So before applying any rebates, your calculation would work out as such: 550 + [(42,000 – 40,000) x 7%] which equals to S$690.
When calculating your total income, you may be wondering what you should include, as certain types of income are chargeable while others are not. In short, taxable income includes money that you’ve made from:
Dividends from your investments are another common source of income that people aren’t sure if they should include. From 1 Jan 2008 onwards, dividends paid by a resident Singapore company is not taxable under the one-tier corporate tax system (except co-operatives). Foreign dividends received in Singapore on or after 1 Jan 2004 by resident individuals, and income distribution from Real Estate Investment Trusts (REITs) are also not taxable.
After figuring out how much you’ll have to pay without deductions, the next step is to figure out what reliefs, expenses, or rebates you may be able to claim to reduce your taxable income. The reliefs on the IRAS website are sorted by whom they are eligible for.
|Reliefs for Everyone||Qualifying Criteria|
|CPF Cash Top Up Relief||The relief matches your CPF cash top up amount, up to a maximum of S$7,000. This is to encourage cash top up into CPF account for retirement savings.|
|Earned Income Relief||If an individual is gainfully employed or carrying on a trade, they will receive this relief. The sum ranges from S$1,000 to S$8,000 depending on age, and will be automatically applied if the individual is eligible.|
|Deductions on donations||Making donations to approved institutions will result in a 2.5 times deduction on the amount donated from your annual salary. For example, if you make $50,000/year and you donated $5,000, your taxable income will be $37,500 [$50,000 – ($5,000 x 2.5)].|
|Deductions on Employment Expenses||These are expenses that are ‘wholly and exclusively’ incurred while carrying out your official employment duties and essential to your income. They were not reimbursed by your employer and were not private in nature. Detailed records need to be kept for these deductions and will vary depending on your claim.|
|Reliefs for Parents||Qualifying Criteria|
|Child Relief||Given to parents who are supporting children who are less than 16 years old and without income. Reliefs are up to S$4,000/child. Parents supporting handicapped children can receive reliefs up to S$7,500/child.|
|Working Mother’s Child Relief (women only)||Given to women who have Singaporean children to encourage them to stay in the workforce after starting families. Reliefs start at 15% of the mother’s income for the first child and increase with every subsequent child.|
The few that we’ve listed above are just some of the most commonly applicable deductions for taxpayers in general. For the full list of deductions and a detailed description of each item, please visit IRAS’ website.
IRAS also provides a tax calculator Excel template which allows you to input your total income and expected deductions to calculate the final amount that you’ll need to pay.
At this point, you may have realised that you qualify for several of the reliefs and deductions listed above, but a key thing to note is that you need to have all the supporting documents to make the claim. Most of the time, this involves numerous receipts, insurance policies, pay slips, and more.
IRAS requires you to keep these records for at least 5 years after your tax filing so that you may produce them if you’re audited at any point. Your claims need to have the exact figures and not estimates, otherwise they won’t be accepted.
If you neglected to keep these documents over the past year because you weren’t aware of their importance, there are some tips that you can put into practice this year so you don’t miss out on next year’s reliefs.
Manual filing is a little bit archaic, and there are a number of apps in the market that can help you track and categorise your spending effectively. If most of your claims are expenditure related, an app like Wally allows you to take pictures of your receipts and store them in your account. This lets you refer back to them any time you need to without having to maintain a large pile of documents.
For those who are concerned about data security and are hesitant about using mobile apps, Microsoft Excel on your computer works just as well. However, you need to remember to constantly backup your document. If you use a cloud service to do so, you may want to ensure that the service is secure as well.
Regardless of what system you go with, the most important element of tracking is to try to be as organised as possible. Cultivate the discipline to sort through your documents at least once a month so you know if everything is in order. If you wait until tax season to do so, you’ll find yourself facing a mountain of paperwork.
By putting these things into practice, you’ll still have a record even if you accidentally lose the physical document. Implementing good habits are essential to avoiding a tax headache each year, and ensures that you’ll never miss out on any deductions you’re eligible for.