Thursday, December 27, 2018

Topping Up $7,000 For My Special Account (SA) For Tax Relief Purpose

You know you are always behind when it is towards the last day before the new year and you are rushing towards finding reliefs for your tax assessment before it closes.

This year, I am leaving it again to the last minute month of the year as cashflow was struggling a little bit in the earlier months and I have finally some spare cash to devote to CPF in order to boost my future retirement income.

The more intriguing part of this topping up aspect is of course the tax deduction relief which plays a big factor for me in trying to reduce my overall assessment. A quick back envelope calculation tells me that I will be able to "save" a total amount of $7k x 11.5% = $805 right away, without even taking into account future 4% per annum benefits on this top up that I made.

From a ROI point of view, it's worth the top-up, as it's incredibly hard to make more than that in the market out there right now with such volatility.

Do note that there is a maximum cap for cash top-up relief per Year of Assessment (YA) which is $14,000 (Self $7,000 and family members $7,000).

There is also an overall personal income tax relief cap of $80,000 for those who have plenty of them though it won't be applicable in my case.


The top-up is pretty hassle free and all it took me was an easy 5 minute to finalize the transfer via internet banking.



An alternative to this cash top up is to max out your medisave account which has a ceiling of

The annual contribution limit has now been revised to $37,740 so in case you didn't hit that (most will not hit that), then you can still make voluntary contribution to your medisave account for tax relief.

In the grand scheme of things, either of the two would be pretty much the same as Medisave can be used to offset your insurance premium before 55 while for Special Account you will have to wait until it becomes a retirement account after 55.

Both account currently earns 4% risk free, so there's no worry on this part.

If you have a spare cash lying around and your tax bracket is in the higher region, I think it's worth the shot at the very least.

Do watch out the timeline as today is the last day for topping up as the account will only be credited towards the next working day which is next Monday.

Thanks for reading.

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16 comments:

  1. I am new to topping up SA account. Can I check that if we are interested to top up for tax relief, we should do it at end of every year, to get the relief next year?.

    thanks

    ReplyDelete
    Replies
    1. Hi D

      If you top up this year, then the tax relief would be applicable to this year of assessment as well.

      Topping up in Dec however will not entitled you to the 4% interest as it will be if you top up in the earlier month. Still everything depends on when your cash flow is best utilize.

      Delete
    2. Hi. I have the idea that this year top up is for next year of assessment.

      Would like to understand what do you mean by "applicable to this year of assessment". Do IRAS even register this?

      Delete
    3. Hi Ethan

      My understanding is they are for this year (Year of assessment 2019) if you manage to top it up in 2018.

      Delete
    4. Thanks for the clarification.

      IRAS is different definition (Year of Assessment in 2019) assess income from 2018.

      I misread it as this year of assessment (income assessed for 2017).

      Delete
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  2. Thanks, for the super fast reply! I'll just get started topping up SA starting 2019. :) Thinking it will be better for me to top in in Jan 2019. :D (for the 4% interest as well)

    ReplyDelete
    Replies
    1. You're welcome.

      Yes, instill a discipline I think you'd see very solid results compounding it over 10 20 years.

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