Budget 2015: Were Your Voices Heard?

Updated 10 May 2016 – By Loanstreet


The collective voices of the Malaysian public were made audible in the scheduling of Budget 2015, an initiative from the government to lend its ears to the rakyat and their plights. And as if in unison, the one cry that resonated was clearly the worries on the rising cost of living.

Not merely bystanders, the rakyat have been racing to contribute their ideas for the tabling of Budget 2015. The PM seemed delighted with the wide range of ideas submitted; the overwhelming response from the Gen Y constituents boded well for them too. Today we analyse the results of Budget 2015 and their repercussions. 

1. Price Reduction After GST?

First, let’s look at a list of items exempted from GST:

Price Reduction After GST

The yardstick measurement of how Budget 2015 affects the average job starts with your everyday purchases.
You might be relieved to see that RON95 is exempted from GST, but with the offset of fuel subsidy, the prices of petrol could still be left hanging in the balance.

Additionally, 532 types of services and goods are expected to decrease in price at 4.1%.
Another 354 items from the CPI basket are expected to increase in prices by at most 5.8%.
That being said, we are all at the mercy of responsible pricing by merchants at the end of the day.

The true impact of this implementation still remains a prediction on paper. In time, we will see how price adjustments are made and how the market copes with it.

2. Lower Taxes

With the implementation of GST and reduced subsidies, one of the calls to revise the current tax structure has been addressed.
The tables below show tax changes to be implemented.

income tax assessment

income tax rates beginning 2015 assessment

2016 income tax assessment

Overall, we definitely see a drop in tax rates across the board. With that, an increase of household income is to be expected. However, it might not really count as additional disposable income simply because your taxes now come in the form of GST.  The new tax reform is an initiative for the government to channel back some of those tax revenue to the rakyat to cope with soaring price. 

3. Cash Handouts & Rebates: The Old vs The New

Monetary aid that remains unchanged is the RM100 to primary and secondary school students. RM250 book vouchers (BB1M) will also continue to benefit 1.3 million students across the nation.

The table below describes the changes of BR1M.

Cash Handouts & Rebates: The Old vs The New

At a glance, it looks like a big increase of handouts to a particular segment. However, it is imperative to practice caution and wisdom with this influx of cash. After all, it’s not really ‘free’ money but rather a part of tax revenues transferred back to you to offset the higher costs of living.

4. Affordable Housing:

The initiatives of ‘Budget 2014’ has managed to cool property speculation to a certain degree. However, the escalation of housing prices has continued to soar. With the new budget, more measures have been proposed to provide affordable housing to the lower income bracket.

Rent-To-Own

One of the new policies in place is the rent-to-own system. It is introduced to help the youth own their first home even if they are unable to secure a housing loan.  Under this scheme, PR1MA home buyers will pay rent for 20-30 years. After which, house ownership will be transferred accordingly. This is a good initiative to aid those who are unable to meet the banks criteria for a housing loan.
Side note: If you wish to check your loan eligibility with the bank, simply utilize the home loan comparison tool on our site and we will do a credit check for you at no cost at all.

Youth Housing Scheme

Another attractive plan in place is the Youth Housing Scheme. This scheme is for married youth aged 25-40 with a household income of less than RM10, 000. In addition, the government will provide a RM200 monthly financial assistance for the first 2 years, 50% stamp duty exemption on transfer documents and loan agreements, as well as a 10% loan guarantee so a 100% financing plan is made possible. Do act fast because this scheme is limited to 20,000 applicants on a first-come-first-serve basis. Also note that the house purchased under this scheme must be RM500, 000 or less.

While both of the schemes mentioned will be helpful for first time home buyers, there is also an indirect measure implemented to reduce housing prices. This is done through the dispersion of housing demand. By expanding public transportation networks (MRT2 and LRT3) and providing intercity bus services, this measure takes into account the working class who will not have to move into big cities to enjoy convenient commuting. As a result, the government hopes to reduce the concentrated demand on houses in the city.

On The Side

PTPTN borrowers who default in their payments will have their CCRIS blacklisted. This is in response to the poor repayment rate of previous PTPTN borrowers. To encourage PTPTN repayment, a 20% rebate will be given to those who settle their loan in lump sum by 31st March 2015! Additionally, those who make 12 continuous repayments monthly until 31st December 2015, will be entitled to 10% rebate. Take note that having your name blacklisted under CCRIS will severely impact your chance to secure a housing loan.

Conclusion

While there are far more grounds to cover on ‘Budget 2015’ we chose to highlight a select few. Overall, the theme in reduction of subsidies and implementation of GST is a good move to improve the overall health of the economy. The course of action taken to negate the rising costs of goods comes in the form of direct cash handouts and tax reforms.

While this is an applaudable attempt, one has to wonder if the dependency on cash aids will help the lower income group in the long run. Not to mention the subsidy rationalisation scheme that has yet to be announced.

For the middle class, the struggle to keep afloat may still be a burden. In general, like most
things in life, ‘Budget 2015’ has its pros and cons. One of the major challenges lies in the rakyat’s ability to control spending behavior and making prudent financial decisions. A hike in living expenses in imminent, but a raise to your salary isn’t.

So start with spending more time equipping yourself with knowledge and skills to build your financial portfolio instead.
It will take you a lot further than any BR1M can.                                         

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