[Income tax] Topping up parent’s CPF SA and asking them to withdraw immediately.? - Seedly
 

CPF

Income Tax

Asked by Anonymous

Asked 2w ago

[Income tax] Topping up parent’s CPF SA and asking them to withdraw immediately.?

Understand that topping up 7k p.a. into parents CPF account enables tax savings. Suppose my parents are 58-60 with at least FRS. Can i top up their SA and withdraw immediately? Thereby saving 1k in income tax?

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You won't be able to do so as Retirement Sum Topping Up after 55 will have the monies flow to your parents RA instead, which then converts to a higher CPF LIFE payout when they start receiving it. Also, as you mentioned, if your parents CPF RA have more than the FRS amount already, you also won't get tax relief if you top up to their RA.

So you'll want to make a top up to their CPF account via 3 account contribution. The trick is, if your parents MA is at the BHS (currently $60K), then contributions that would have been supposed to be allocated to the MA will then spill over to SA/OA, so effectively you can treat CPF OA/SA as a high interest savings account. But tax benefits will not be possible this way.

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If only it was that easy. Firstly, you can't top up to SA directly after 55. Only to RA. And any top ups to RA would convert that money to additional CPF Life payout. So can't take out immediately.

You'll instead need to do a Voluntary Contribution to all 3 accounts with then a small portion paid to OA and SA. But that isn't tax deductible. But the OA and SA monies can be withdrawn if FRS was met.

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Musang King
Musang King

2w ago

Hi Hariz, thx for prompt response. Suppose if parents are age 68-70 whereby they are not auto enrolled in CPF Life due to year of birth?
Hariz Arthur Maloy
Hariz Arthur Maloy

2w ago

It's the same with the older RSS scheme.