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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