It’s Tax Season 2017! Got a reminder message from Inland Revenue Authority of Singapore (IRAS) to file my Year of Assessment (YA) 2017 income tax return for the year 1 Jan 2016 to 31 Dec 2016 by mid April 2017. How nice of them to let me know it’s time to pay my dues to the Singapore Government. Oh well, at least the personal tax rates are low here, could have been worse like when we were back in Australia.
By the way, are you eligible for No-Filing Service (NFS)? If you refer to the IRAS website, it basically means you are not required to file a tax return. Your Notice of Assessment (NOA) is sent to you and it is computed based on your auto-included income and previous year’s relief claims, which may be adjusted depending on your eligibility criteria. IRAS mentions that it is your responsibility to ensure that your NOA is accurate and you can inform them otherwise.
As a previous tax consultant, I don’t approve of the NFS. However, many Singaporean tax residents that I speak to about this including my wife, mother, sister, brother and mother-in-law (i.e. people that still work and earn salary income) approve of the NFS. It’s not surprising. After all, there’s less effort and time spent on getting your tax return filed. Which is exactly my problem with the NFS.
It creates a dependency on IRAS to ensure that your NOA is correct. You are less likely to take the time and effort to work through and understand your income, deduction, relief, chargeable income, tax rate and tax payable figures. And I’m hoping you understood most of the tax terms I just used. These are some of the things you would have noticed:
- Interest income, dividend income and capital gains are generally not taxable in Singapore
- Your compulsory employee CPF contributions qualify for CPF Relief and this is automatically included along with Earned Income Relief and NSman Self & Wife Reliefs
- Other reliefs such as Parent Relief, Qualifying Child Relief and Working Mother’s Child Relief have to be manually included in the first year of claim before rolling over to subsequent years.
- You can pay your income tax over 12 monthly interest-free instalments
Let’s talk about the Working Mother’s Child Relief. This is one of the ways the Singapore Government encourages married women to remain in the workforce after having children. I won’t comment on whether this has been effective with the continuously declining birth rate for the past several years. However, I would say that this is one of the highest monetary incentives I have seen for working mothers to stay in the workforce. There are qualifying conditions for the relief but they are not difficult to meet for a married couple with young to teenage children whereby the mother is a salaried employee.
If the working father and mother are equally capable of taking care of the children in Singapore, I would encourage the father to take a step back in his career and let the mother thrive in her career. Despite the advancement of feminism, this continues to be an unpopular opinion, especially when expressed by a man. Even when it works out to be such a clear financial advantage for the woman to keep working. It becomes more effective the higher earning your wife is. And I continue to have no idea why men do not step back and support their working wives more in their careers here in Singapore.
The tough part of a working mother’s career is the initial return to work after having children. Her career plateaus for a number of years and this figure increases the more children she has. It is only after the working mother gets through those years that something amazing happens. Almost like a transformation. She gets really good at what she does. Working men seem to get more tired as they get older but working women seem to have more energy, improve their time, people & stress management skills over time.
Let’s use my mother-in-law as an example. She started outearning my father-in-law after both my wife and brother-in-law entered secondary school. When my wife was in university, my mother-in-law reached her peak and earned enough chargeable income to be in the top tax bracket in Singapore. If you are familiar with the resident tax rates here, you would know what an achievement this is. My mother-in-law could claim the Working Mother’s Child Relief on her two children (my wife and brother-in-law) of about S$80,000 at the highest point then. At the top tax rate of 20%, the reduction in tax payable can reach S$16,000. Just imagine, S$16,000 more in your pocket each year if the high income earner is the mother instead of the father.
Marry a wife more capable than you and step up to the child caring and household responsibilities. Support your wife fully in her career endeavours and it can pay off financially. As for your own career, don’t be lazy and push yourself as well. Ignore the noise around you. As long as you can stay close to her earning power, both of you are already going to benefit a lot from this arrangement. Besides, I already told you this is going to be an unpopular opinion.
I’ve been on NFS for past 5 yrs liao, but each time I’d log in to check the NOA figures. Anyway with more companies on AIS, unless the employees bother to collate their monthly earnings, CPF contributions, work-related expenses, claims & benefits received etc, there is also not much point to check the NOA as everything is lumped into final figures. Many people don’t realise there are certain claims/benefits which are taxable & non-taxable. E.g. medical claims are non-taxable.
And anyway, as my family constantly reminds me every March, in Singapore it’s a blessing to pay income taxes otherwise it means either you’re unemployed (financial independence?!?!) or earning below living wage. Added to the fact that personal income taxes in S’pore are among the lowest in the world.
Most people also don’t realise that the personal income tax regime here is among the simplest in the world to process, unlike many other countries with tons of permutations of deductibles, reliefs, claims, carry-forwards, schemes, etc. Here I would say a Pri 6 kid should be able to manually add-up and compute the chargeable income less deductibles for a typical worker, and provide a notional income tax figure based on the schedule of income tax rates.
Yup, it’s good that you check your NOA figures despite being on the NFS. It’s surprising how many people don’t do that. As long as the income, deduction and relief figures have been collated properly in the NOA, a quick check is sufficient and the NFS becomes highly beneficial at that point.
Haha, a blessing to pay income taxes. That’s a positive way to think about it and I should try this sometimes.
The personal income tax regime in Singapore is much simpler and the tax rates much lower compared to other developed countries. I’m thankful for this but I still believe that we should have a strong understanding of the basic tax principles. Especially when it comes to filing our own tax returns.
You make a valid point that we should check our tax statements despite the NFS system in place. Having said that, I have been relying on the NFS to file my taxes except the year that I gave birth to my daughter, I went into the system to make changes to the Qualifying Mother Relief.
Agree with the part where sometimes father can take a back seat to be the homemaker. If it makes economic sense to do so, who cares about the social stigma?
Yup, once you ensure all the tax reliefs are in the system, the NFS becomes a very useful and convenient tool to ease the tax return filing process.
We should encourage the equalisation of the homemaker and breadwinner responsibilities between the father and mother. That’s a good way to make progress towards gender equality at home and work.