Asked on 05 Nov 2019
I will be contributing to SRS already, so was wondering if it's a good idea to top up my MA?
I would prefer MA only instead of SA and OA, as SA is only usable at 55/65.
I'm thinking of maxing out the MA so my salary's CPF contribution will spill over to SA so it will compound faster.
Thanks in advance.
Voluntary MA contribution is elegible for tax relief, subject to the following criteria (quoting CPF board website)
Amount of Tax Relief VC-MA
The amount of tax relief given to the lowest of the following:
Voluntary cash contribution directed specifically to Medisave Account or
Annual CPF contribution cap for the year, less Mandatory Contribution (MC)* or
Prevailing Basic Healthcare Sum(BHS)^, less the balance in Medisave Account before the voluntary cash contribution.
If your income from work would max out your Annual CPF cap, then point (2) basically triggers and the calculation would be $37740 (annual cap) less MC (also $37740, from work) = $0 and that would mean you would get no tax relief. In this case, maxing out MA is merely done so that you can trigger the spillover effect from the interest and your own salary contributions.
Have you considered topping up SA under RSTU instead? It's eligible for tax relief of up to $14K, of which $7K can be your own SA, and another $7K can be a loved one such as your parents.
Feel free to reply to this post if you have questions.
Personally i am skeptical about topping up cpf. However, if you find it suitable for you, then consult the cpf officer or call their hotline. I believed they will give you better answer.
If you are able to invest and generate passive income to cover income tax. Why not try this? Just my 2 cent.