Calling all Malaysians, tax season deadlines are nearing April 30th (manual filing) and May 25th (e-filing) for YA2023. There are also some tweaks to tax reliefs this year. Let's dive into changes so you can maximise your deductions and file accurately!
Amendment of Tax Rates for Specific Income Brackets
The finance minister and Prime Minister, Datuk Seri Anwar Ibrahim, had proposed several alterations to the income tax rate for a few income bands during the tabling of a revised Budget 2023.
In particular:
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A reduction of 2% of the tax rate for those who fall under the taxable income categories of RM35,001 to RM100,000
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An increase of 0.5% - 2% if a person's income falls between RM100,001 and RM1,000,000.
The table below shows comparisons between the newly proposed individual income tax rates and income tax rate for the year 2022, along with income tax savings or tax increases for residents due to the tax rate reduction or increase.
Expansion of Scope and Increased Relief Limit
The good news! The Malaysian government has increased the tax relief for medical expenses to RM10,000! But that's not all - they've also broadened the scope to include a broader range of medical treatments.
These include diagnostic assessments and early intervention/rehabilitation programs conducted by registered medical practitioners or those under the Allied Health Profession Act 2016.
For example (serious illness), if you pay RM7,000 for cancer treatment for your spouse, you can claim the entire amount under the "serious illness" category.
You can now claim tax relief for your life insurance/takaful payments and voluntary contributions to your EPF (up to RM3,000). This applies to everyone, regardless of your employment sector.
Previously, there were separate limits for these contributions:
- Public servants with pensions: RM7,000 for life insurance/takaful
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Private sector employees: RM3,000 for life insurance/takaful and RM4,000 for EPF
Now, everyone can claim the combined amount (life insurance/takaful + voluntary EPF) under a single RM7,000 limit for YA 2023. This means you can save more for your future and reduce your tax burden!
This initiative was meant to help rebuild and boost Malaysians' retirement savings as it was revealed that 6.7 million contributors above the age of 55 had less than RM10,000 in their EPF accounts. Read here on WHY Your EPF Can Be Your BFF
Example:
BEFORE: Sarah (private sector) claimed RM3,000 for life insurance and RM4,000 for EPF (separate limits).
NOW (YA 2023): It's a combined RM7,000 limit! Sarah can keep her current contributions (claiming the total amount) or strategically adjust them (e.g., increase EPF and slightly reduce life insurance) to maximise retirement savings and lower her tax bill.
Extension of Childcare Centre & Kindergarten
Good news for parents! The tax relief for childcare at registered centres (children aged 6 & below) stays at RM3,000 for YA 2023.
Extension of SSPN
The tax relief for Simpan SSPN contributions stays at RM8,000 for YA 2023! This benefit has been a constant for Malaysian taxpayers, increasing from RM6,000 to RM8,000 in Budget 2019. Originally planned for removal in the revised Budget 2023, it was reinstated due to public request.
Other student debt reduction assistance include:
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10% discount on the remaining debt for full loan settlement.
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10% discount on payment of at least 50% of the debt balance in one payment.
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15% discount on payment by salary deductions or scheduled direct debits.
These discounts are applicable till 31st March 2024.
With these Malaysian tax updates in mind, you can tackle your YA 2023 tax filing! Hopefully, this guide has empowered you to navigate the changes and unlock some exciting tax benefits. Remember, a little planning goes a long way – so start gathering your receipts and get ready to maximise your tax savings!