In Singapore Budget 2016, it was announced that the Personal Relief capping of $80,000 (i.e. the maximum amount of Personal Income Tax Relief an individual can claim will not exceed $80,000) shall be effective from Year of Assessment 2018.
This would mainly affect working mothers because the Working Mother’s Child Relief (WMCR) would have such high level of Personal Relief to reach the cap of $80,000. If a working mother has only 1 child, it is unlikely that she will be affected by this Personal Relief cap of $80,000 because the maximum relief she will receive from WMCR is $50,000. However, once the working mother has 2 or more children, she may to be affected by this new Personal Relief capping rule of $80,000 depending on the level of income she earns. A working mother with the following levels of income and corresponding number of children will be affected by the Personal Relief cap of $80,000 (as illustrates in the table below):
– She earns $168,000* and above and has 2 children;
– She earns $99,000* and above and has 3 children; or
– She earns $76,000* and above and has 4 children.
|Less Personal Relief|
|– Earned Income Relief||(1,000)||(1,000)||(1,000)|
|– CPF Relief||(20,400)||(19,800)||(15,200)|
|1st Child (15%)||(25,200)||(14,850)||(11,400)|
|2nd Child (20%)||(33,600)||(19,800)||(15,200)|
|3rd Child (25%)||–||(24,750)||(19,000)|
|4th Child (25%)||–||–||(19,000)|
*round up the nearest thousand and assuming that the working mother is only claiming WMCR and CPF Relief. Her husband is claiming Qualifying Child Relief. CPF Relief is based on lower of 20% of 17 months x $6,000 or 20% of actual income. If other Personal Reliefs (like Grandparent Child Relief, Foreign Maid Levy, etc) are also claimed by the working mother, the income level can be even lower than that indicated above.
What does this mean to working mother?
Going forward, working mother in the above situation where Personal Relief capping rule of $80,000 is applicable should let the husband claim the Qualifying Child Relief and Parent Relief so that these Personal Relief which can be claimed by either husband or wife will not be wasted.
If the working mother is a sole proprietor, what can she do to avoid the above situation?
She may wish to incorporate the business to effectively and legitimately overcome the above situation. To find out more about how to structure your tax efficiently and effectively as a working mother running your business, please contact us at A Tax Advisor Pte Ltd (firstname.lastname@example.org or ). Find out more about our other services as well as tax investigation and audit services.