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Tax Relief 2018: 9 Things You Should Know When Doing 2019 E-Filing

Updated 12 Mar 2019 – By Nisya Aziz


First order of being a taxpayer - getting ready for tax season in Malaysia lor. This is the time where we’re prepping ourselves to scramble around to find the receipts for items we purchased last year. Why?  Because being Malaysians, if we can’t bargain then we’ll find a way to pay less. And, with all these receipts, we hope to creatively use all the tax deductions and reliefs to the max!

Now, some of you may be confused with the terms and ask, “What’s the difference between tax deductions and tax reliefs?” Well, both are in charge of reducing your chargeable income. The only difference is that tax deductions come from gifts and donations you made. There’s also another term called tax rebate, which is deducted from the actual taxed amount.

Enough babbling, let’s move on to the things that you should take note when doing e-filing because it can be complicated sometimes and you don’t want to miss something that can let you squeeze back the money government had taxed you. 
 

1. Tax payable rate for 2018 is lesser than 2017 (well, for some income bracket)

Looking at the first five chargeable income bracket below, the percentage of the tax that needs to be paid is lower compared to 2017 - which is great news for most of us, right?
 
Chargable Income (RM) Tax Rate 2017 Tax Rate 2018
1 - 5,000 0% 0%
5,001 - 20,000 1% 1%
20,001 - 35,000 5% 3%
35,001 - 50,000 10% 8%
50,001 - 70,000 16% 14%
70,001 - 100,000 21% 21%
100,001 - 250,000 24% 24%
250,001 - 400,000
24.5%

24.5%
400,001 - 600,000 25% 25%
600,001 - 1,000,000 26%
26% 
More than 1,000,000 28% 28%

Perhaps some of you are wondering what’s chargeable income? How to calculate this? Say no more, here's the equation:
 

Chargeable Income = Total annual income – Tax exemptions – Tax Reliefs


For better understanding, let’s take a look at this example - meet Danial and his details.



Based on the info above and equation given previously, Danial chargeable income would be:

Chargeable income = RM65,200 - RM1,600 - (RM9,000 + RM6,000 + RM1,800 + RM950)
                                     = RM45,850

Tax payable = RM45,850 x 8% (tax rate)
                        = RM3,668

 

2. There’s no cap for Tabung Harapan tax relief

If you had donated money to Tabung Harapan last year then you are entitled to tax deduction benefit with no cap - we’re talking about dollar to dollar here as announced by our Finance Minister, Lim Guang Eng. For instance, if you donated RM100, then you’ll get to deduct RM100 of your annual salary.

Source: Malaysiakini

Having said that, take note that you can only claim a tax deduction up to 7% of your annual salary. For example, if your annual salary is RM40,000, then the maximum amount that's deductible is RM2,800 for this category. Also, bear in mind that donations to other organisations must be recognised by the government such as Mercy Malaysia, UNICEF Malaysia, and Malaysian Care. This doesn’t include if you’re donating to a person.

 

3. You can’t claim tax relief for a non-vocational education

This can be confusing because at first government said can, but now cannot, so which one leh? Well, according to LHDN, if you’re pursuing a certificate/diploma, bachelor’s degree in English Literature, Performing Arts, Philosophy, Anthropology - basically non-vocational - you’re not eligible for the education tax relief. The only categories of courses that eligible are Law, Accounting, Islamic Financing, Technical, Vocational, Industrial, Scientific, and Technology



That said, if you’re pursuing non-vocational courses at the Master’s or Doctorate level, then you can take advantage of this tax relief. You can claim up to RM7,000. Perhaps, you should make a wise choice when it comes to this life decision - pursuing what you like or paying less tax?

 

4. Moms with babies, you can get extra tax relief

Taking care of a baby isn’t cheap - you don’t need to have a baby to know this. We googled for breast pump price in Malaysia and was shocked by the price tag. The price starts from RM45 to more than RM500. Never thought running a mini food factory can cost you this much. 



This is why the government is giving a tax relief up to RM1,000 for the breastfeeding types of equipment - to lessen the financial burden for the breastfeeding working mothers. So what are requirements?
  • The types of breastfeeding equipment that are entitled to this tax relief are the breast pump kit (manual and electronic), ice pack, breast milk collection/storage equipment and a cooler set/bag.
  • Anything above RM1,000 CAN’T be claimed. So spend your money wisely, mothers.
  • It’s only available for women. So men CAN’T claim this tax, which is fair because you guys don’t produce milk.
  • You are only allowed to claim the money once every two years. So, if you claim the amount in 2019, the next claim can only be made in 2021.
 

5. So, sports attire isn’t sports equipment...

When it comes to claiming tax relief, many people got this part wrong. LHDN states in the Income Tax Act that the tax relief for sports equipment is only eligible for those used in sporting activities defined in the Sports Development Act 1997. This is to encourage you to live a healthier life.



This means equipment like dumbbell, shuttlecocks, nets, rackets, golf set, and more are considered as sports equipment. Meanwhile, jerseys, sports shoes, pants, swimsuits are considered as sports attire, which means you can’t claim for a lifestyle tax relief. 

You may be dissatisfied and said, “How to swim without swimsuits?” or “Are we supposed to run barefoot?”. But hey, that’s the requirements and if you look at the dictionary, these two words - attire and equipment, have a different meaning.  If you’re stubborn, you can still make that claim. Just know what to answer lah when there’s an audit and you have to pay for the fine/penalty.

 

6. There’s a tax rebate for Muslims who paid Zakat 

To those who aren't familiar, Zakat is a payment made annually by the Muslims under Islamic law. It’s basically a way for a person to ‘cleanse’ his/her earnings because some of the money earned may not be halal due to imperfections of the system. This money is also used to help those who are in need.



And in Malaysia, those who paid Zakat (any type of Zakat) can get a tax rebate. Why? Well, due to both income tax and zakat, there is the concern that Muslims will end up paying double amount of tax. Koyaklah pocket like this. Anyway, the amount of rebate is limited to the total tax charged. Don’t quite get it? Fret not, here’s an example:

Miss Adibah needs to pay RM1050 for her income tax for the Year of Assessment 2018. Additionally, Miss Adibah had also paid RM650 for Zakat on Income, RM430 for Zakat on Savings and RM21 for Zakat Fitrah.

The calculation:
Tax Payable - Zakat paid
RM1050 - (RM650 + RM430 + RM21)
RM1050 - RM1101 = - RM51


Basically, Miss Adibah don’t have to pay any income tax at all because of the zakat rebate. And, if she's doing a monthly tax reduction (PCB), she can get a tax refund for the balance. You too can do the same, just make sure to pay your Zakat before 1 January of every year to be able to claim for a tax rebate

 

7. Women who return to work can get tax exemption

More often than not, in Malaysia, women made the choice to take a break from the workforce after having kids because they want to focus on becoming full-time moms. So to encourage more women to continue their careers and increase the contribution to the national economy, the government has offered a financial incentive.



Okay, what is it all about? If you’re on a break for more than 2 years and have decided to get back to work, you’re eligible for a one-year individual income tax exemption. This would mean you’re saving a lot of money especially when your income falls into a higher tax bracket.

This tax break programme has been implemented this year (2019) and will be overseen, as well as managed by a GLC called TalentCorp. So, if you ladies want to take advantage of this incentive, remember to submit your application to TalentCorp before 31 December 2019. The exemption would be effective for Year of Assessment 2018 to 2020.

 

8. A person with a mental health condition can also claim for a tax relief

Just to break the stigma, not everyone with mental illness is locked at Tanjung Rambutan. Some of them are still part of the functioning member of society. It means they still go to work and need to pay tax. So, if you feel that you’re in this ‘category’, guess what? You can claim for tax relief for your meds, therapy and check up that is under the Medical Expenses for Serious Disease up to RM6,000



Some of you may ask, “What other serious illnesses that are eligible for tax relief?”. Well, according to LHDN, cancer, heart attack, pulmonary hypertension, renal failure, chronic liver disease, fulminant viral hepatitis, brain tumour, major burns, major organ transplant, Parkinson’s Disease, HIV/AIDS, major amputation of limbs, head trauma, chronic skin disease, diabetes mellitus, major Thalassemia, Rheumatology and Leukemia are considered as serious illnesses.

And if you did a complete medical checkup (for you, spouse or children), you can also claim tax relief of RM500.

 

9. Married couples can choose to do a joint tax assessment

Yes, you read that right! Married couples have a choice to file a joint tax assessment with their spouse as per stated in Section 45 of Malaysia’s Income Tax Act 1967. What’s great about this is that both will save money. If the husband or wife earns less than RM4,000, then it’s advisable to file it jointly. This will allow you to make use of the additional spouse relief of RM4,000. This is what we called teamwork.



But, if any of you (wife or husband) earns more than RM4,000, you guys might want to consider separate assessment so that each of you can take advantage of the RM9,000 individual relief. Plus, you can also maximise other applicable reliefs that can help bring down the taxable income for both of you to a lower tax bracket.

This is, of course, one of the big decisions married couples need to think about. One way to find out which can give you the biggest tax savings is to double check your calculations and then look at the balance due from each method - joint or separate. You can do this via e-filing, where you get to see the tax due for each individual and compare it with the joint assessment.

 

Maximise your tax relief as much as you can!

We hope this list will help you to maximise your tax relief. Don’t forget to track all of the receipts needed (keep them for at least 7 years) and remember to file your income tax before the due date on 30 April 2019! Having said that, the deadline would usually be extended to 15 May 2019. But to be safe, it’s better to get it done ASAP, people. Once that is done, do keep track of your bank account as the government would be refunding tax paid in excess if you have any.



Oh, one more thing - here’s another bonus tip to help you pay less tax. Try to talk to your manager or HR if your income can be arranged in a way that non-taxable allowance is increased instead of basic salary like travelling allowance, parking allowance, dental allowance, etc. This can help you to reduce your income tax. 

Other than that, we urge you not to take income tax lightly you know - can kena penalty/fine if you keep avoiding to pay. Even after you die, you’d still need to pay if you owe the government tax payable. After all, these taxes are what funds low-cost medical services like the government clinics and hospitals, the building of roads and highways, the provision of public transport, etc. So let’s be a responsible citizen.

Happy tax season!
 
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