At first glance of the 2009 Budget, it didn’t seem to bring me much at all. Rather, I felt that it was a budget with the interests of the lower and higher income groups in mind, but nothing much for middle income earners like myself.

Some of the more immediate benefits that the lower income group will be able to enjoy a higher tax rebate at RM400 instead of the current RM350 (this is for people with taxable income of RM35,000 and below). Also, there is an additional 50% stamp duty exemption given to loan agreements for the purchase of medium cost houses that cost up to RM250,000. Households with monthly electricity bills of RM20 or less will also not have to pay for electricity starting October 1 this year. So far, so good.

As for the higher income group, there is a reduction in income tax rate from the highest marginal tax rate of 28% to 27%. You may think that 1% is a small number, but bear in mind that a 1% savings on a large amount is quite sizeable. In addition, there is also an exemption of tax on interests earned from savings. If I am not wrong, taxable income from interests apply only to a sizeable deposit for a period of 12 months and above. This means that the rich can now save more since their interests earned are tax free.

So what do people of middle income get? Well there is a reduction in the marginal income tax rate from 13% to 12%, and this should serve the middle income earners. But I argue on the point that 1% of RM100 is very much less in savings compared to 1% of RM1,000. Don’t you agree? If the rich can get a 1% savings, why can’t the middle income group get a 2% reduction?

Having said that, I read and re-read the 2009 Budget to be thorough how else I can stand to benefit. Here are some of my little ‘blessings’:

1. Staff benefits like interest subsidies on housing, motor vehicles and education loans will be tax exempted up to a total of RM300,000 in loans.

2. Childcare allowance of up to RM2,400 a year will also be tax exempted.

3. Employers providing maternity benefits will also see a tax exemption and I hope this will serve to encourage companies to provide more maternity benefits.

4. Traditional mecidine that includes acupuncture and even ayurvedic will also be tax exempt.

Well that is about as much as I can benefit from the 2009 Budget. What about you? Have you read between the lines and found some goodies in store for you?

Since last year I’ve been skeptical of the online tax assessment system called E-filing. Despite the department coming to our office to do a roadshow and explain the benefits of E-filing and providing us easy access to our passwords, I still didn’t register for it. I much prefered to do it the manual hardcopy way.

Many of my colleagues and friends tried out E-filing and said it was rather easy to use. You just needed to fill in things like your income and exemption items and everything is calculated automatically for you. Besides, they said if you were entitled to any refunds from the department, you’d get it first before those who submit the hardcopy. This proved to be true as it was published in the papers when they were doing the refunds.

After hearing all the positive feedback about it, I thought it isn’t too bad after all. But still I didn’t think of registering for it, still wondering if the system is really reliable enough. Then today I saw the department running yet another roadshow at a mall. I decided then to just sign up for it and give it a try.

When I got home, I went into the website and proceeded to log into E-filing for the first time. Providing my password and NRIC details, the system found my name and account number. All’s good so far. Next, it needed me to fill out my personal details like contacts, NRIC number, birth date, reset password, etc. Finally, I submitted the details for safekeeping in the system and lo and behold…I got into the next page where it said “Error…login for user account failed”.

So much for wanting to give it a try. So much for not trusting my instincts that the sytem is not that reliable. I’m definitely going back to the physical form. E-filing, thanks but no thanks!

I read an article about tax assessment from The Star 3 days ago. It’s written by Lee Voon Siong who is an executive director of RKT Tax Consultants Sdn Bhd, an independent member firm of RSM International, an affiliation of independent consulting and accounting firms with the 7th largest worldwide network. The article is reproduced below.

For illustration purpose, appended below are the computations showing the tax position of a taxpayer under two scenarios, i.e, under separate and joint assessment:

1. For business and rental income, these income should be reported net of expenses wholly and exclusively incurred in the production of the said income.

2. If entertainment expenses are incurred with the company’s business, a claim for deduction can be made. However, details such as persons entertained, purpose, matters discussed and the receipts must be available to support the claim when requested. The amount deductible is restricted to the amount of entertainment allowance received.

3. Taxable dividend is normally received by taxpayer net of tax but for tax reporting, gross dividend must be declared. The original dividend voucher must be retained to support the tax credit claim. If a loan is used to purchase the shares, the loan interest can be deducted against the gross dividend income.

4. Only donations to approved institutions are allowable. The approval is normally indicated on the donation receipts, which must be kept for verification.

5. For EPF and life insurance claim, a husband and wife can claim up to a maximum of RM6,000 each if they are separately assessed. Under a joint assessment, the maximum allowed is RM6,000.

6. If a husband and wife are separately assessed, they are allowed to claim up to a maximum of RM5,000 each on medical expenses incurred on their parents. The maximum amount claimable is restricted to RM5,000 under a joint assessment.

7. A tax rebate is given if the taxpayer’s chargeable income does not exceed RM35,000. If the tax rebate exceeds the actual tax payable, the amount of tax rebate deductible is restricted to the actual tax charged.

8. From the above tax computations, it can be noted that the total tax payable is substantially lower under a separate assessment. However, depending on their circumstances, married couples are advised to do their computations before deciding whether it is more beneficial to be separately or jointly assessed.

In view of the deadline April 30 for non-business cases and June 30 for business cases, taxpayers are advised to submit their tax returns early to avoid the last minute rush. Penalties will be imposed for late submission of tax returns.

It’s that time of the year again where we dreadfully fill out the tax assessment and grudgingly pay off any arrears. Every year, I keep telling myself to find ways to minimise tax payable (through legitimate means, of course) but I never remember to find out until the year is over. By then it is too late to do anything except to repeat the reminder for the following year.

Since this is the start of a brand new year, I shall attempt a couple of things to save on next year’s assessment. I found a few that I could use, and maybe they are useful for you too. Check them out.

1. Save for your child’s education
You could get yourself a tax exemption amounting to RM3000 just by opening a savings account for the purpose of funding education under the National Education Savings Scheme. Read more about it here. To calculate how much this exemption will save you, simply multiply it with the tax bracket that applies to your income. For example, if you fall under the 24% tax bracket, then your tax savings on this would be RM3000 x 24% = RM720.

2. Play some sports and exercise!
Seriously, playing sports could save you some tax dollars. Did you know that you can get a deduction of RM300 if you purchase sports and exercise equipment? This is not just to keep you healthy, it keeps your bank account healthy too! So what is it that qualifies as sports and exercise equipment? Unfortunately it has not been clearly defined in the Sports Development Act 1997, but things like racquets, balls, exercise bikes and treadmills are some things which are quite safe to earn you some deduction. So hurry, don’t put off your exercises! Tax savings in this case will amount to RM300 x 24% = RM71 (using the same assumption that you fall in the 24% tax bracket).

3. Upgrade your PC
Buying a computer will qualify you for an exemption up to RM3000. Previously the exemption was only up to RM500 which, honestly, is too little. The new amount now seems like more it. Take note though that you can only use this exemption once in three years. So time your purchase wisely if you can. Your nett savings on this would be RM3000 x 24% = RM720.

4. Upgrade yourself
Go back to school, pick up a new cert! Though the exemption of RM5000 for postgraduate studies is not new, there has been a change recently. Previously, you will only earn the exemption if you take courses approved by the government. Now, it has been widened to include all postgraduate studies. So earning yourself that MBA or PhD is not just going to make you look better, it will save you money. This time, this exemption will translate to a savings of RM5000 x 24% = RM1200.

There are a more exemptions but I think most people already know of them, like buying books and magazines, take up a life insurance plan, medical and education plans, pay for your parents’ medical bills, donate to charity, etc.

So there you have it, start doing some of them now and see the results in your next tax assessment! I am getting started on some right away.