How do you maximise tax savings for yourself?
Imagine having to file your tax returns for YA 2021, and receiving a big shock after that?
“Why do I have to pay so much?! Are there any ways to reduce my taxes?”
“Why aren’t there any additional reliefs available for me, especially during this period? Are there reliefs that can reduce my taxes?”
Safe to say, the answer is a BIG YES!
So, how exactly do we reduce our taxes effectively?
Essentially, the two main components that you should aim to maximise are the approved donations and personal reliefs. With the Singapore government announcing a 250% tax deduction for qualifying donations to be extended till 2023, it brings an opportunity for tax residents to take advantage as $2.50 will be deducted from your taxable income next year for every $1 donated to an approved Institution of a public character (IPC). Furthermore, as approved donations to IPCs have no caps imposed, any unutilised donations can be carried forward for a maximum period of 5 years.
On the other hand, personal reliefs are capped at $80,000 from YA 2018 onwards and are deducted off from your assessable income. For most, you need not worry as it is estimated that 99% of tax residents will not be affected by the cap. As qualifying conditions may change every year during the Minister’s Budget speech, it is highly recommended to maximise your reliefs as any outstanding amount will be forfeited instead of being carried forward to the next year of assessment.
Notice of Assessment. Image by PwC
To help you reduce your taxes, here are the things that you should take note.
Step 1:Maximise applicable tax reliefs
IRAS has introduced a variety of tax reliefs that are tax-deductible against your assessable income, based on the nature of your background. Such examples include grandparent caregiver reliefs to render social support for working mothers whose children under the age of 12 are looked after by their grandparents. As different types of relief hold certain qualifying conditions, do look out for the personal reliefs available on the IRAS website to find out all reliefs applicable for yourself. Alternatively, you may also click on the “personal relief checker” which helps you to identify the available reliefs faster!
Step 2: Maximise approved donation deductions
To allow flexibility for tax residents to donate to the local communities, IRAS has provided a list of allowable donations on their website, which includes cash, shares and artefact donations to any approved IPC. Similar to personal reliefs, IRAS also imposes certain qualifying conditions for approved donations, which include giving tax deductions only to charities with approved IPC status. Therefore, it is important to check for IPC status of charities and look out for qualifying conditions of donation items before donating!
Step 3: Claim applicable COVID-19 tax reliefs and pay-out
With the ongoing pandemic affecting jobs across all industries, the Singapore Government has initiated several COVID-19 support measures and tax guidance to ease the tax burdens of tax residents affected. This includes tax exemptions for employment benefits for accommodations, exemptions for working remotely from Singapore due to COVID-19, and also rental relief for individuals who are owners of non-residential properties. As these are temporary support measures, it is important to take note of the qualifying conditions for such measures as well.
Alternatively, if you do not qualify for any COVID-19 tax reliefs, you may apply for COVID-19 related pay outs issued by the Singapore Government. As such pay outs are meant to support individuals through exceptional circumstances from the COVID-19 pandemic, all pay outs are will not be taxable. The list of pay outs available are as follows:
- Self-Employed Person Income Relief Scheme
- COVID-19 Support Grant
- Workfare Special Payment
- Temporary Relief Fund
- NTUC Care Fund (COVID-19)
- Wage Support for Tourist Guides licensed by the Singapore Tourism Board (STB)
- Payout to Singaporean Seafarers funded by the Maritime and Port Authority of Singapore
- Jobs Support Scheme
- COVID-19 Quarantine Order Allowance Scheme, COVID-19 Leave-of-Absence (LOA) Scheme, COVID-19 Stay-Home Notice Scheme
- Government Cash Grant
- Courage Fund COVID-19 Relief Schemes
Written by: Keith Chiong (by Assembly Works)