facebookIncome tax question: what will you do in this situation? - Seedly

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Anonymous

17 Nov 2019

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Saving Hacks

Income tax question: what will you do in this situation?

Based on current calculations, I will have to pay 6400 in tax.

If top-up SRS 15k = pay 4700 tax.(saved 1700)
Total pay 19,700. (4.7k gone. 15k in SRS)

If pay 5k donation = pay 5000 tax (pay 5k save 1400).
Total pay 10000. (10k gone)

If top-up SRS 15k and 7k MA = pay 3900 tax (pay 22k save 2500)
Total pay 25900. (3.9k tax gone. 15k in SRS, 7k to MA)

If 15k SRS + 5k donate + 2k MA = pay 3k tax (pay 22k save 3.4k)
Total pay 25000. (3k tax + 5k donation = 8k gone. 15k in SRS, 2k to MA)

Discussion (16)

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Elijah Lee

15 Nov 2019

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi anon,

I think you meant that you were going to top up 7K in SA instead of MA?

Based on your figures, your taxable income after reliefs is approximately $106.5K. If it was me, I would just work to bring myself out of the 11.5% tax bracket, and hence contribute what is necessary to do so ($26.5K). Once I'm out of that tax bracket, it feels less straining to me to meet my tax obligations.

In this case I would use a combination of SRS ($15.3K), CPF SA top up ($7K) to bring me to $22.3K and then make up the rest from donations ($1.68K). Alternatively, you can also do CPF SA top up to a loved one ($4.2K) to bring yourself out of the tax bracket.

This is based on my belief that

  • CPF is the cornerstone of my retirement and I should strive to have a decent sum in it
  • I intend to use SRS for long term investments and only withdraw after 62

A 7% rate of tax is still acceptable to me. I'm actually getting yields from my investments to meet my income tax obligations, and a 7% yield is more realistic (REITs, high yield bonds) than trying to get an 11.5% yield.

Hopefully you will an alternative perspective after reading my thoughts.

If you have queries feel free to reply to this post.

View 10 replies

Leslie Koh

15 Nov 2019

Associate Financial Services Manager at Prudential Assurance Company Singapore

Personally, I would top up to my SRS first followed by donations.

That's assuming your budget allows.

View 2 replies

Pang Zhe Liang

15 Nov 2019

Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)

If you want to have some flexiblity and have a chance to touch your money, then opt for SRS.

If yo...

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