I'm in my mid-20, and didn't declare that I am freelancing. My strategy is to contribute up to the $20k limit of CPF OA to get the 3.5% ASAP by putting in a lot monthly, and empty it for housing. Any advice? - Seedly
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Anonymous

Asked on 30 Sep 2018

I'm in my mid-20, and didn't declare that I am freelancing. My strategy is to contribute up to the $20k limit of CPF OA to get the 3.5% ASAP by putting in a lot monthly, and empty it for housing. Any advice?

My income averages between 5-7k mthly. I contribute CPF up to 40% of my income, 25% in STIETF, the rest in CIMB.

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Gabriel Tham
Gabriel Tham, Kenichi Tag Team Member at Tag Team
Level 9. God of Wisdom
Updated on 07 Jun 2019

if you did not declare to IRAS and still contribute to CPF voluntarily, then IRAS will be knocking on your door to ask where you get the money from?

Unless you have a very good explaination....I suggest you better declare to avoid running into trouble with the law.

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Question Poster

02 Oct 2018

Thanks to each and everyone of you here. I didn’t know know that’s considered tax evasion, will definitely file for taxes next year. With that, how would hdb calculate the amount of grants when I apply for bto?
Gabriel Tham
Gabriel Tham

02 Oct 2018

The amount of subsidies and loan quantum you can take depends on your declared income for freelancer. If you declared $0 income, CPF or banks cannot loan you any money because you earn $0 (as declared). Because these are institutions that lend money, they will need proof of income hence, the Tax statement for freelancers or for regular salaried employee is just payslips For regular salaried people, it is all automated.
Question Poster

02 Oct 2018

Thank you for the informative video! Really appreciate it. Another question, do I have to register as a sole proprietor in order to declare myself as a freelancer?
Kok Koon
Kok Koon

02 Oct 2018

I'm not sure about this but i highly recommend that u do. Adds professionalism to your image. for example, your will have a business bank account with cheques paid to your business name, like ' Lim Trading/Services' vs to your name. With registration, u can get UEN number for .com.sg websites and corpass for government services to fulfil your legal and compliance matters.
Joash Chua
Joash Chua
Level 4. Prodigy
Answered on 20 Nov 2018

Ok there is some misconception that needs to be addressed.

Firstly, your CPFOA will NOT compound annually at 3.5%. It will compound at 2.5%. The additional 1% is a flat simple interest of 20,000 (200) which will be credited to your CPFSA (4% p.a.).

As a self-employed person, you can limit your CPF contribution at 37%. Since your income hovers between 5-7K, I am assuming the average is 6K, which is the CPF wage ceiling. Your CPF contributions are also tax deductable, so your chargeable income on your tax returns should be about 40,000 after all other deductions. That would put u in the 2nd lowest tax bracket and the income tax is about 550 annually.

Secondly, its good you are setting aside money for investments, but it looks like you are invested exclusively in Singapore equities. This is way too much concentration risk in your portfolio. You need to have a more geographically diversified portfolio. STI has been hammered and is currently -10% YTD, compared to S&P 500 +2-3% YTD.

Finally, I hope you have an emergency fund. Salaried workers should have at least 3-6 months of living expenses set aside, while freelancers should have at least 6-12 months of living expenses in emergency funds. This is simply because freelancers have no guaranteed and steady cash flow compared to salary workers.

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Don't rush to get to $20k OA just for the 3.5% pa interest in CPF account. It can be $5,000 or $10,000, but the 3.5% pa interest do not add up to be a significant sum, for balances less than let's say, $50,000 (I did the math myself and saw the trend).

Just contribute if you see it fit for a good 3.5% interest rate, if not keep the earnings as liquid for opportunities to come by. :)

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