Malaysia Personal Income Tax 2018: New Measures and Tax Reliefs You Should Know About

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Income Tax 2018: New Measures and 6 Interesting Tax Reliefs You Should Know About

Intense financial calculations and last-minute investments are top of taxpayers’ mind as Malaysia gears up for Income Tax 2018.

While the government has announced certain new tax-saving proposals and extended the duration of other incentives that were supposed to end last year, most of the other ground rules pertaining to income tax filing remain the same.

MUST READ: Infographic: How to File Income Tax Returns Online in 6 Easy Steps

Let’s first understand the new income tax measures in 2018 that’ll directly impact the taxpayers:

Income tax rates dropped by 2 percentage points

Prime Minister Najib Razak announced in his Budget 2018 speech in October last that Malaysians earning annually between RM20,000 to RM70,000 will have their income tax slashed by 2 percentage points.

Here’s a table to explain how this announcement will reshape income tax rates for Malaysian residents with different chargeable income ranges in 2018:

Chargeable income range Previous income tax rate Income tax rate in 2018 Difference

RM0-5,000

0% 0% 0%

RM5,001-20,000

1% 1%

0%

RM20,001-35,000

5% 3%

-2%

RM35,001-50,000

10% 8%

-2%

RM50,001-70,000

16% 14%

-2%

RM70,001-100,000 21% 21%

0%

RM101,000-250,000

24% 24%

0%

RM250,001-400,000

24.5% 24.5%

0%

RM400,001-600,000

25% 25%

0%

RM600,001-1 million

26% 26%

0%

Above RM1 million 28% 28%

0%


Non-resident individuals will be taxed at a flat rate of 28%.

The government said that the move to reduce income tax rates by 2% will benefit the middle-income groups, increasing the usable income of individuals (earning annually between RM20,000 to RM70,000) between RM300 to 1000.

Must read: 9 Different Methods to Pay Income Tax in Malaysia

Not just that, the Budget 2018 also announced two other measures to benefit income taxpayers:

SSPN tax relief extended to another 3 years

Resident taxpayers were eligible for tax relief of up to RM6,000 for their net savings in the National Education Savings Scheme (SSPN) from the Year of Assessment 2012 to 2017.

The Budget 2018 extended the relief for the next 3 years, i.e. from YA2018 to YA2020, to continue encouraging people to save for their children’s higher education.

The SSPN net saving is defined as total deposit minus total withdrawal in a year.

Income tax incentives for women returning to work after a career break

In a first, Budget 2018 also announced tax incentives for women returning to work after a career break of 2 or more years. From now on, women returning to workforce can claim individual income tax exemption on their employment income for a maximum of 12 consecutive months, effective YA2018 to YA2020.

The exemption would be extended only to women returning to workforce after a break of 2 or more years as of October 27, 2017, and the applications will have to be submitted to the Talent Corporation Malaysia Berhad between January 1, 2018, to December 31, 2019.

That said, all the other provisions pertaining to individual Income Tax remains the same this year.

Must read6 Ways Women Can Save More on Taxes

We now discuss 6 useful tips which will help you claim more income tax relief this year.

1. Top up annual EPF deduction with life insurance premiums

The total tax deduction limit for Employees Provident Fund (self or spouse) is RM6,000. But if your annual EPF contribution is less than that, you can top it up with life insurance premium so that the combined value reaches RM6,000.

Click here to read all you need to know about life insurance in Malaysia, including the top providers and their offers.

Related: No More Excuses: 4 Reasons Why You Should Get Life Insurance

2. Make the most of lifestyle tax relief

Prime Minister Razak also announced a new lifestyle tax relief during his Budget 2017 speech, under which taxpayers can claim total benefits up to RM2,500 in a year for self, spouse or child.

The new lifestyle tax relief basically consolidates some of the previously-extended separate tax reliefs and adds certain new categories to make it a single pool.

So, taxpayers can now enjoy annual tax benefits for the purchase of:

  • Computers
  • Smartphones and tablets
  • Reading materials (excluding banned books)
  • Printed newspaper
  • Sports equipment (excluding motorised two-wheel bicycles)
  • Monthly internet subscription bills
  • Gym membership

So keep those receipts safe and ensure you show bills worth at least RM2,500 while filing your taxes this year.

3. Don’t compromise on medical check-up expenses

Now there’s no reason why you shouldn’t go for a complete medical examination (for self, spouse or child) when the government gives up to RM500 tax relief specifically for it in a year.

Having said that, if you, your spouse or your child is unfortunately diagnosed with a serious disease, you can claim annual income tax relief of up to RM6,000 for the medical expenses.

Cancer, heart attack, pulmonary hypertension, renal failure, chronic liver disease, fulminant viral hepatitis, brain tumour, major burns, major organ transplant, Parkinson’s Disease, HIV/AIDS, major amputation of limbs, head trauma, chronic skin disease, mental illness, diabetes mellitus, major Thalassemia, Rheumatology and Leukemia are considered serious diseases.

4. Claim tax relief for your higher education

If you’re pursuing higher studies, the government has special tax relief of up to RM7,000 for you. Having said that, there are certain conditions to avail the benefits:

  • Tax relief for education fees at certificate/diploma/bachelor’s degree level is only applicable for courses in the field of law, accounting, Islamic finance, technical studies, technology, vocational studies, industrial studies or scientific studies.
  • Tax relief can be claimed for any course at master’s or doctorate level.
  • Tax relief cannot be claimed by scholarship-holders.

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5. Claim tax relief for buying breastfeeding equipment

Women taxpayers can now claim up to RM1,000 once every 2 years to purchase breastfeeding equipment for their children below 2 years old.

The purchase can be made either in a complete set or separate parts.

6. Claim tax relief for child care or kindergarten fees

Parents with young children can claim tax relief of up to RM1,000 for child care or kindergarten fees. The tax relief can be claimed by either parent for a child whose age is less than 6 years.

Click here for a complete list of tax reliefs Malaysian residents can claim.

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