24 February 2015

One Way to Avoid Paying More Tax - SRS Adjustments from 1 Jan 2016

According to the latest budget announcements, the personal income tax will go up by as much as +2% for the higher income brackets. At the same time, the Supplementary Retirement Scheme (SRS) contribution limit would be raised from $12,750 to $15,300 for Singapore citizens and PR with effect from 1 Jan 2016. For foreigners, the corresponding SRS contribution limit would be raised from $29,750 to $35,700 (they do not have CPF contributions).

Supposing that with the new taxation levels, my tax bracket is at 19.5% (i.e. taxable income above $240,000). By maxing out my SRS contribution at $15,300, this amount would be deducted from my taxable income. As such, I would be making a tax avoidance of 19.5% x $15,300 = $2,983.50. That's enough for another short holiday!

Guess it's also one way to offset the increase of tax. I wonder if anybody is going to tell their bosses this year, "Boss, don't pay me more this year!"

Previously:
An Excursion on SRS, Deferred Taxation
Maximising Returns with Minimal Risks - for the ultra conservative investor
Start of 2015 - Time for Some Tax Avoidance

2 comments:

Derek said...

Hi Lizardo,

On the contrary, I will want to ask my boss for a pay raise so that I can take advantage of higher CPF ceiling. Maybe I should look for those who do not want to be paid more. LOL

Lizardo said...

Thumbs up to that!