It’s budget time again and on Friday (28 September 2012), many Malaysians will anxiously wait to see what proposals will be announced that will impact their daily lives.
Tax rate reductions? Goods and services tax? These are some of the obvious issues that are constantly in our minds and require no further elaboration.
In keeping with the theme of the upcoming budget which will, among other things, be focusing on enhancing the well-being of the rakyat, the government should relook at the personal income tax reliefs available to individual taxpayers.
The following are some of the personal income tax reliefs which the government should consider in light of inflationary pressures and rising cost of living.
1) Individual and dependent relatives relief
The last increase for the above relief from RM8,000 to RM9,000 was effected in year of assessment 2010. It is therefore timely that the government consider an increase of the RM9,000 limit to alleviate the rakyat’s burden of the continuous rising cost of living.
2) Parent/elderly dependant’s relief
As our nation continues to develop and the financial burden of caring for the elderly increases, perhaps some form of parental relief should be introduced.
At present, taxpayers are accorded a tax relief of RM5,000 but only on medical treatment, special needs or carer expenses incurred for their own parents.
Those who bear the responsibility for taking care of parents are offered no tax relief for other maintenance expenses.
Taking into account the cost of healthcare services and the fact that some taxpayers need to support their elderly dependants in all aspects and not just with medical bills, the government could perhaps consider introducing a parent/elderly dependant relief that complements the above relief.
This would alleviate some of the financial burden of the Rakyat who are responsible for providing for their family as well as elderly dependants and would be in line with promoting Malaysia as a caring society.
3) Extension of medical expenses for parents to parents-in-law
Currently, the medical expenses of RM5,000 for parents is only claimable by taxpayers on medical expenses incurred for their own parents only.
The government should consider extending this relief to cover the taxpayer’s parents-in-law in particular where the taxpayer is the sole breadwinner in the household.
Incentive for working couples
The government has been encouraging women to stay employed even after marriage and motherhood.
In order to encourage women to stay in the workforce and to contribute to nation building, a standard relief could be granted to working couples for the use of child-care facilities or employment of a domestic maid to take care of their children.
At present, employees who receive child-care allowance from their employer are exempted from tax up to RM2,400 a year.
The grant of a similar quantum of relief would place those working couples who are not provided with such child-care allowance by their employer, on an equal footing with those who do receive such an allowance.
4) Relief on Employees Provident Fund (EPF) contribution and premium on life insurance policy
The combined relief is claimable up to RM6,000.
In order to ease the burden of the low and middle-income earner, the EPF contribution relief should be based on the actual contribution made by them with an increased cap of RM9,000.
The additional RM3,000 relief is to align the relief with the contribution to Private Retirement Scheme which was introduced in last year’s budget.
Child relief
5) Currently, the relief to be claimed by either the husband or wife is as follows:
Existing relief
Ordinary child relief RM1,000
Child over 18 years old, unmarried, receiving full-time education RM1,000
Child over 18 years old, unmarried, receiving full-time tertiary education RM4,000
Disabled child RM5,000
In line with the government’s effort to have a highly educated Malaysian workforce, the amount of child relief should at least be doubled in view of the increasingly high costs of educating and raising children.
6) Relief for purchase of books
Currently, an individual who purchases books, journals, magazines and other similar publications for the purpose of enhancing knowledge, as evidenced by receipts issued in respect of the purchases, is eligible for tax relief of up to RM1,000 each year.
In line with the promotion of lifelong learning and to inculcate a reading culture among the rakyat, the above limit should be increased to RM2,000.
As the rising cost of living continues to affect the quality of life of the rakyat, it is hoped that the government would consider the above measures when it unveils Budget 2013.
Written by Tai Lai Kok and Long Yen Ping (both are executive directors at KPMG Tax Services Sdn Bhd)