Which is a better option? Topping up CPF account for Tax rebate, or partial refund to CPF the amount used for housing loan? - Seedly
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Asked by Serene Toh

Asked on 28 Dec 2018

Which is a better option? Topping up CPF account for Tax rebate, or partial refund to CPF the amount used for housing loan?

Actually not sure if I'm even making sense here. Read somewhere that we can refund the amount we used for purchasing a house without selling the house. (not sure if can do partial repayment, just wrote in to check with CPF)

Just wondering if it makes more sense to get tax rebate or reduce the house repayment amount. Or better to keep the excess to reduce the remortgage amount when my lock-in period expires next year.

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Loh Tat Tian
Loh Tat Tian
Level 6. Master
Updated on 07 Jun 2019

Let's do some maths.

Accrued interest are amount you will earn, if you leave the money in CPF. That's incurring 2.5% loan imho (which you can waive later on).

Tax Relief is immediate saving of 2% up to 22%

CPF RSTU is a 4% interest or If you do Voluntary contribution, it's a 2.8% to 3% interest.

If we add up tax relief and interest rates, my humble opinion is CPF RSTU + Tax Relief is better than refunding.

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Serene Toh
Serene Toh

on 04 Jan 2019

I've just read the article you recommended to someone else. https://heartlandboy.com/money-withdraw-from-your-cpf-at-55/ not sure if I'm reading it right. But it seems like the best way if I want free cash at 55 is not to top up directly by RSTU, instead do a VC to OA then transfer from OA to SA?
Loh Tat Tian
Loh Tat Tian

Updated on 04 Jan 2019

Then you need to have self-employed income. From there, it will only be possible to enjoy tax relief. https://www.areyouready.sg/YourInfoHub/Pages/News-Voluntary-Contribution-vs.-Retirement-Sum-Topping-Up-Which-suits-you-better.aspx Also, https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF--Central-Provident-Fund--Relief-for-Self-Employed/ This is the issue with Voluntary contribution. Only Self-employed can gain from both VC and Tax Relief. Do VC only if your tax relief really matters too little.
Mic Mc
Mic Mc
Level 2. Rookie
Updated on 07 Jun 2019

Yes, you can put cash back into CPF and specifically to return (in full or in part) the amount used for property.

This is also my recommendation to you because: -every dollar you take out of CPF misses out on the 2.5% risk free interest that "government" gives your CPF. -every dollar you take out of CPF later comes back to bite you as "accrued interest". In street talk, you will lugi at 2.5% a year.

  • put the above 2 points together, it's 5%pa improvement for every dollar you do so.
  • compound it actually.

Putting back your CPF used for property should be done as soon as you comfortably can because it's a solution that keeps giving back to you. Putting cash to SA is the next better solution because it's a 4%pa improvement for every dollar, and a one time tax reduction.

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Loh Tat Tian
Loh Tat Tian

on 18 Jan 2019

Just wanna check how you get that 5% pa. Assuming you got $50,000 (which is the amount of OA + accrued interest you used) to return to OA, or for SA interest at 4%, Which one gives more bang for the buck? I'm still leaning towards SA because the opportunity cost of accrued interest can be waived off if you have FRS.