Why my Child gets all the spare change in the house?

How many of us still mainly use physical cash nowadays? With credit cards and other forms of cashless payments, it is not uncommon to just carry some cash and no coins. Perhaps only the previous generation, like my mum, still do carry a purse to keep spare change. When we do and receive back the change, do you find it a chore to keep the coins on yourself?

Coin Deposit Fees: S$0.015 per piece (total fee rounded to the nearest one cent)
Coin deposit fee is automatically waived for:
POSBkids Account until the child turns 16 years old, for the first 1,000 pieces deposited per calendar month*.

I opened a POSB Kids savings account soon after my child was born. Do you know that children savings account usually have a waiver on coin deposits fees up to a certain limit?

I started to introduce a savings habit in the family for my child. All spare change goes to her! Number One, depositing of coins into her savings account is fee-free. Number Two, it gets rids keep stock of coins lying around the house and wondering when we will next use them. Number Three, as part of her financial education I plan to inculcate the value of money and savings from young. Coming up with a guide to educate young children on financial education is part of my plans.

I consistently collate coins from lunch meals, family outings, groceries shopping and bank in periodically. Sometimes, I also use this avenue to fully cash in on old 5 cents and 1 cent coins which present a chore to use in quantity.

Slowly but surely over the course of 1.5 years, the sum is beginning to add up. I have been keeping track, and it seems that a good $349.40 has accumulated!

Of course I recognise that the interest rate for the savings account is a measly 0.05%, and the money saved is channeled to her Regular Savings Plan (RSP) for accumulating capital gains from young. The investment or trading account is a joint-junior account and will be transferred to her proper when she turns 18.

Do you accumulate your coins too or leave them lying around?

Breakdown on Tax reliefs numbers

Fun fact: Today, there are 15 tax reliefs, each serving an objective. Taken together, the reliefs can unduly reduce the taxable income.

Earlier, I was just briefly looking at income tax reliefs from CPF contributions, CPF top-ups and SRS top-ups. Having some time at hand, I delve into the other tax reliefs over the years from 2004 to 2018, depending on the data available. At first glance, the number of claimants for Earned Income and NSman looked pretty high.

Earned Income reliefQuantum
i) Below 55 years old$1,000
ii) 55 – 59 years old$6,000
iii) 60 years old and above$8,000

We can see that the Government is encouraging people to work longer, with an emphasis on those above 60 having a higher quantum for Earned Income relief. However, the majority of us fall under the “Below 55 years old” category and the tax reliefs is just $3.25 billion dollars, or on average about $1,800 per individual for YA 2018.

Relief for NSmenQuantum
i) Active$3,000
ii) Inactive$1,500
Key Appointment Holdersadditional $2,000
Relief for Wives of NSmen$750
Relief for Parents of NSmen $750

As seen from the graph, tax reliefs for NSmen is just $0.98 billion dollars, or on average about $1,500 per individual for YA 2018. In contrast, tax reliefs from CPF contribution is the highest and stands at $13.7 billion dollars, or on average $11,400 per individual for YA 2018.

Child reliefs is seeing a good increase both in terms of number of claimants and tax reliefs, which is a good sign. This not only means more children are being borne, but also more per family nucleus. The Working Mother Child Relief (WMCR) was reviewed for YA 2009. This was not only to encourage married women to remain in the workforce after having children, but also to have more children.

YA 2005 to YA 2008YA 2009 onwards
1st child5%15%
2nd child15%20%
3rd child20%25%
4th child25%25%
Subsequent childN/A25%
Cap (QCR+HCR+WMCR)$25,000 per child$50,000 per child
QCR: Qualifying Child Relief
HCR: Handicapped Child Relief

Note: Above percentages are of mother’s earned income. Cumulative WMCR for all children is capped at 100% of mother’s earned income.

By removing tax reliefs for Child, CPF, Earned Income and NSman from the picture, we could now have a better look at the rest.

Even though the government has continuously encouraged life-long learning with an enhanced Course Fee relief, it seems that Singaporeans are not catching up. Only 43,239 claimants, which accounts for 1.71% of assessed individuals for YA 2018.

Prior to YA 2011YA 2011 onwards
Course Fee relief$3,500$5,500

Food for thought, does the numbers mean anything to you from a macro perspective?

Why I stress that working Singaporeans should maximise their tax reliefs

All working adults are assessed on their income earned. After taking into account tax reliefs and rebates, a good 74% pay taxes on their income. As mentioned in my earlier article on avoiding paying too much taxes, many people still confuse tax relief with tax rebate. A tax relief is deduction from the total income to derive your chargeable income, whereas tax rebate is deducted from the actual taxed amount.

Generally, the Government provides various tax reliefs and rebates to promote certain social objectives, such as encouraging marriage and family formation, recognition for taxpayers who support their dependants, and saving for retirement. Over the years, new reliefs have been introduced and enhanced significantly. Today, there are 15 tax reliefs, each serving an objective. When taken together, the reliefs can unduly reduce the taxable income.

Do you understand why sometimes you pay lower taxes one year, and much higher tax on another even though your salary had not increased by much? One of the reasons why is that Personal Tax rebate may differ from year to year. I shall reiterate here:

Net Tax you have to pay = Tax you should have paid – Tax Rebate
Net Tax you have to pay = $1,500 – $200 (for YA 2019) = $1,300 for example

Ever since the collapse of Lehman Brothers in 2008, the government has been dishing out Personal Tax rebate in alternate years, starting off with a generous max rebate of $2000 for YA 2008, 2009 and 2011.

However, have you noticed a tapering down of the max Personal Tax rebate from $2,000 to $1,500 to $1,000 to $500 to $200 for YA 2019? My guess is that there may not be any more Personal Tax rebate after which till we experience another global crisis, which it remains to be seen.

Fun Fact: Did you know that Dividends from stocks and shares used to be taxable? As of 1 January 2008, shareholders in Singapore are no longer taxed on dividends paid by a Singapore resident company under the one-tier corporate taxation system.

Prior YA 2018, there was no cap on Personal Tax relief. However, YA 2018 saw an introduction of a $80,000 tax relief cap per Year of Assessment. The tax relief cap is “to keep our tax system progressive. Nonetheless, even with the cap, our tax burden remains competitive.” The tax relief cap does not apply to the tax deduction for donation. This deduction is not a personal income tax relief.

Ninety-nine per cent of tax residents can claim their reliefs without being affected by the cap, including 9 out of 10 working mothers who claimed the Working Mothers’ Child Relief. The remaining one per cent of tax residents who are expected to be affected, can still enjoy tax reliefs, up to a cap of $80,000 per year of assessment.

While you can not change how much tax rebate you can receive, you are in control of how much tax reliefs you can enjoy. If you were one of the many working individuals out there, keep a watch for your tax reliefs and avoid paying too much income tax.

How far have Singaporeans progressed with hacking their CPF SA/RA and SRS?

I enjoy analysing data during my spare time and to see if there is any trend or deeper meaning from a macro perspective. I was reading through government statistics available online and I am amazed at how much and how far these data sets go back.

So I was interested to find out how far have Singaporeans progressed with hacking their CPF SA/RA and SRS till date, and one of the ways is to look at the tax reliefs claimed for both respectively. Reason also being, these tax reliefs are automatically claimed and there is no need to self declare, therefore numbers are accurate.

From the table, the number of working individuals had been steadily increasing since 2006. Out of this, the taxable group (individuals earning more than $20,000) is reaching a steady state of close to 74%. Though, this does not necessarily mean we are being more affluent, but that income is trying to play catch with inflation.

Needless to say, the number of Singaporeans with contributions to their CPF has increased, and it is well over 50% in the 10 years span from 2009 to 2018. Percentage-wise, CPF cash top-ups is but slowly increasing as well. With social media and increased awareness, numbers have increased about 5 times.

The current annual tax reliefs for SRS is $15,300. For 2018, the average placed into the SRS by each of these individuals is $14,015. The true average is probably much higher, as a number of people have opened a $1 account to lock in to the prevailing retirement age.

Withdrawals are penalty-free only if they take place after the statutory retirement age that was prevailing at the time of your first SRS contribution. The statutory retirement age is currently at 62.

CPF cash top-ups in the preceding year under the CPF Retirement Sum Topping-Up Scheme receives a max $7,000 tax relief for self:

Special Account (for recipients below age 55); or
Retirement Account (for recipients age 55 and above).

CPF cash top-ups in the preceding year under the CPF Retirement Sum Topping-Up Scheme to the Special/Retirement Accounts receives a max of another $7,000 tax relief for:

Parents or Parents-in-law;
Grandparents or Grandparents-in-law;
Spouse; and/or

In total, a maximum of $14,000 tax reliefs apply for each individual. For 2018, the average CPF cash top-up is $7,013, which is close to the steady state of low $7,000 annually. It is a little harder to delve deeper as an individual is able to contribute to more than 1 party subject to the max tax relief amount of $14,000.

How far are you from the national statistics?

(Disclaimer: This is a personal observation and deduction of data, which may be inaccurate)

Planning Effective Goals for your child from Young

Prior to the birth of my first child, I had started to pen down or mind-map what I had in mind for her, as well as what was lacking for me when I was a child on reflection of my own life. What you see above is still an ever-improving one as time goes by.

Contrary to what others think, it is never too young to start planning for your child. It need not be complex and could start off simple. Setting effective goals is different from forcing goals on your child.

Forcing goals or ideals on your child would include expecting her to be a top student or scholar in school, to grow up and be a doctor, lawyer etc when she grow up, be your support for retirement.

Setting effective goals looks at clear objectives where everyone would have gone through anyway. How and what you wish to achieve is your own personal freedom. You and me alike would like to continue having good health or recover from sickness quickly, enjoy a good learning experience through education and have a peace-of-mind when retiring. Therefore, effective goals setting for my child include the area of health, education, retirement as well as some other goals that I would like to gift her with.

How often have we had wished that our own parents had done something similar for us when we were young? The previous generation had a big gap in life planning.

Having an education depended on whether your family could afford it. My Dad had to drop out of polytechnic to work, while my Mum had to plateau her education at the end of secondary school. Parents bought insurance for themselves and their children solely based on the advice of their insurance agent. There was hardly any comparison between a range of competitor products because of complexity in understanding. Retirement planning just means savings in their bank accounts or investing in plain vanilla bank fixed deposits. There was no social media, no online forums for discussion and hardly any simple books on life planning.

But what they could do, they did their utmost. They put me through private tuition when it looked like I was not going to make it in secondary school. They saw me through University under the CPF Education scheme. And for these and more, I am thankful.

If there was a time to make a change, it is now. Let us not make the next generation a sandwich generation and to start off their own lives better informed.