1) National Higher Education Fund Corporation (PTPTN)
Budget 2017 announced a 15% discount on the outstanding debt for full settlement, a 10% discount for payment of at least half of the outstanding debt made in a single payment, and a 10% discount for repayment through salary deductions or direct debit.
These measures are effective from October 22 2016 to December 2017. The borrowers can use this opportunity to ease burden of having to repay their PTPTN loans.
Let’s say, Tyler borrowed RM48,000 for his three-year degree and is obligated to repay his debt in February 2017. We take a look at the break-down:
| Loan amount (RM16,000/year x 3 years) | RM48,000 |
| Interest rate | 1% per annum |
| Repayment period | 15 years or 180 months |
| Total interest charged | RM7,200 (RM48,000 x 1% x 15 years) |
| Total repayment | RM55,200 |
| Monthly repayments | RM306.67 |
He can select either one of the three alternatives to benefit from the discount given.
Option 1 (settle the loan in full):
He is qualified for the 15% discount on outstanding debt. The total repayment is only RM 40,800 instead of RM55,200. He saves RM14,400.
Option 2 (settle at least 50% of the loan)
He is eligible for the 10% discount on outstanding debt. In this case, he pays RM24,000 (half of the outstanding loan amount) and gets RM2,400 discount on the remaining loan outstanding.
Option 3 (pay through salary deductions)
He obtains a 10% discount for each payment made. For example, Tyler pays RM306.67 every month and receives RM30.67 discount each month on his remaining loan outstanding. Nevertheless, the salary deduction incentives are only applicable until the end of 2017.
2) Private retirement scheme (PRS)
The budget includes an investment incentive for PRS contributors (below 30 years old), where the government will increase incentives from RM500 to RM1,000 to those contributors with a minimum accumulated investment of RM1,000 over a period of two years. Also, tax relief of up to RM3,000 per annum is given to PRS contributors for the first 10 years from assessment year 2012.
As an example, Tyler is 25 years old and retires at 60 years old. He invests RM1,000 into his PRS account and receives a one-off payment of RM1,000 by the government. It is a 100% return on his investment. Assume that, given a 6% dividend return every year, the value of Tyler’s PRS account will increase to RM16,250 at the time of Tyler’s retirement.
Under the same situation, Tyler chooses to deposit extra RM100 per month now until the month before his retirement, then the value of his PRS account will now become around RM160,000. In fact, are you aware that EPF has recently just revised its minimum savings threshold to RM196,800?
By starting an amount of RM1,000 and regular RM100 savings per month on his PRS account, Tyler will have achieved at least 70% of the basic savings recommended by EPF for retirements.
Grab this opportunity! It is a good start to accumulate savings and secure your retirement financially.
3) Tax liability
Tax season is near, so what to do to ensure the utilization of all available legal means to reduce taxes? As an example, there is a lifestyle tax relief of up to RM2,500 from 2017.
This includes reading materials (now including printed newspapers), computer, tablet and smartphone, internet subscriptions (newly added) and gym membership (newly added).
Good news to those who are not a fan of reading, you would be able to put that money towards claiming some broadband subscriptions and purchasing electronics. Besides that, you can get a tax relief for buying electronic devices every year instead of waiting every three years.
The downside is that the maximum claim is RM2,500 instead of the previous RM3,000 for computers and RM1,000 for books. For those who spend on all items listed in the lifestyle tax relief, they have to choose which of their purchases they would claim for.
If you have a kid aged below 6 years, you are qualified for some new tax reliefs. Enrolling your children aged 6 years and below into registered nurseries and pre-schools will entitle you to a tax relief of up to RM1,000. Also, if you as a mother are still breastfeeding, you are eligible for a new tax relief of up to RM1,000 which is claimable every 2 years for purchase of breastfeeding equipment.
The tax relief might not seem like much, but as the old saying goes, “bit by bit, over time, it will accumulate into a mountain”.
4) Real Estate
To curb speculation in property prices, the rate of stamp duty on instruments of transfer of real estate worth more than RM1million will be increased from 3% to 4% effective January 1 2018. For instance, when purchasing a property of RM2million, the difference in stamp duty payable will be as follows:
| Before the 4% implementation | After the 4% implementation | ||
| First RM100,000 @ 1% | RM1,000 | First RM100,000 @ 1% | RM1,000 |
| Next RM400,000 @ 2% | RM8,000 | Next RM400,000 @ 2% | RM8,000 |
| RM500,000 and above @ 3% | RM45,000 | Next RM500,000 @ 3% | RM15,000 |
| RM1million and above @ 4% | RM40,000 | ||
| Total stamp duty payable | RM54,000 | Total stamp duty payable | RM64,000 |
| The difference in stamp duty: RM10,000 | |||
It could burden potential homebuyers looking to buy a property priced more than RM1million especially in the Klang Valley area. Start looking for a buyer now if you plan to sell your property that is worth more than RM1million.
It is challenging to find a purchaser for your property at the price you want, even worst after 2018 because the buyer has to pay an extra RM10,000 for buying a RM2million property. Plus, if you are desperate to sell your property, you might actually end up lowering your selling price.
Conclusion
By taking a closer look at Budget 2017, you can plan your finances better in the year ahead to increase your savings especially since 2017 might even be a tougher year than 2016.
