14 February 2023
Singapore | Budget 2023 – A Vialto Viewpoint
The Backdrop
The Singapore Budget 2023 was highly anticipated as it was expected to lay out the future plans for preparing Singapore to excel in the post-pandemic world, while at the same time, helping Singaporeans deal with rising inflation costs, slower economic growth and Goods and Services Tax (GST) hikes.
Overall, the Budget 2023 proposals ensure that Singaporeans – especially in the lower and middle income segment are given the necessary support to tide over the uncertainties in the post pandemic era, while preparing Singapore for the future by attracting investments and building capabilities in a world where countries are shifting from prioritizing mutual gains to national security.
Key fiscal measures focused on workforce and new ways of working
Building a robust retirement nest for an ageing population
1. Continued increase of Central Provident Fund (CPF) contribution rates for senior employees
From 1 January 2024, for older workers aged 55 to 70, the Government will continue with a third round of increase in CPF contribution rates, and provide employers with CPF transition offsets as per the previous two raises.
2. Increase in CPF contribution for Platform Workers and Platform Companies
From late 2024, the CPF contribution rates for Platform Workers below age of 30 and Platform Companies will be aligned to those of regular employees and employers over a phase-in period of five years. Older Platform Workers can also opt-in for this scheme. To help the Platform Workers earning S$2,500 or less a month, CPF Transition Support will also be introduced to cushion the cash-flow impact on their take-home pay.
In addition, Platform Companies will be required to insure the workers to the same level that employees are covered under the Work Injury Compensation Act (WICA).
These changes will certainly present increase in business costs to Platform Companies. These companies will be looking at the Committee of Supply (COS) debate in the hope that there will be some Government support similar to the CPF transition offset for senior workers. Another aspect that needs clarity is the downstream opt-in facility, for example whether both the Platform Workers and Platform Companies need to mutually agree to the opt-in.
3. CPF monthly salary ceiling would be progressively increased to S$8,000 by 2026
| Current | From
1 Sep 2023 | From
1 Jan 2024 | From
1 Jan 2025 | From
1 Jan 2026 | |
| CPF Monthly Salary Ceiling (S$) | $6,000 | $6,300 | $6,800 | $7,400 | $8,000 |
| CPF Annual Salary Ceiling (S$) | $102,000 | ||||
While there is currently no change to the annual salary ceiling, from the employee’s perspective, this update provides more certainty regarding their CPF contribution amount (and in turn CPF relief), regardless of their pay structure.
For example, an employee with monthly salary of S$7,500 with no Additional Wages (AW) component would now benefit from the higher CPF contributions (S$6,300 – S$6,000 * 37% = S$111 per month).
From the employer’s perspective, besides the possible increase in business costs, employers would need to consider various implications from the payroll administration standpoint, as follows:-
For example, where bonus (AW) paid in January 2023 was subject to the capping of S$30,000, due to the increase in monthly capping to S$6,300 from September 2023, the total AW cap allowable will be reduced to S$28,800 for calendar year 2023. As such, more guidance is required from the CPF Board if the refund application is required, if there will be automatic refund from the CPF Board or there can be lower CPF contribution in the month of December, taking into account the overall capping of S$102,000.
For bonus that has not been paid yet, it is important that the payroll system is adjusted to capture the change and corresponding AW capping.
Providing Support to Young Families
1. Fixed Dollar Relief for Working Mother’s Child Relief (WMCR)
For eligible working mothers with children born on and after 1 January 2024, the WMCR will no longer be claimed based on a percentage of the mother’s earned income. This change will ensure the lower to middle income group of working mothers will be entitled to fixed amounts of relief, which they would otherwise not be eligible.
By way of illustration, before this change, a working mother with an annual income of S$40,000 could only claim tax relief of S$6,000 on her first child. With the fixed dollar relief, she will now be eligible to claim for an enhanced tax relief of S$8,000. This enhanced relief will be enjoyed for additional children as well.
| Current – % of Mother’s Earned Income | Illustration:
Working Mother with Earned Income of S$40,000 – current entitlements | Child born on or after 1 Jan 2024 – Fixed Dollar Relief | |
| 1st Child | 15% | S$6,000 | S$8,000 |
| 2nd Child | 20% | S$8,000 | S$10,000 |
| 3rd & subsequent child | 25% | S$10,000 | S$12,000 |
The measure will benefit working mothers with yearly income up to S$53,300 (depending on the number of children), which is again in line with the Government’s progressive direction to provide more support to the lower to middle income group of taxpayers, while potentially increasing tax revenue from the high income working mothers.
2. Paternity Leave doubled to four weeks
Government-paid paternity leave will be increased to four weeks for eligible working fathers with children born on and after 1 January 2024. Such grant of additional leave, while optional for employers to start with, will be made mandatory in due course to ensure fathers are involved in the care of their children, especially in the early days. While employers who grant the additional two weeks of leave will be duly reimbursed (subject to capping), they should consider workforce planning in view of the longer absence of such employees.
3. Foreign Domestic Worker Levy Tax Relief will be withdrawn from Year of Assessment (YA) 2025
The withdrawal of this relief has been proposed in view of the fact that many Singaporean families already benefit from the domestic worker levy concession. This withdrawal will undoubtedly impact working mothers, and more so those who do not qualify for the domestic worker levy concession, but is intended to allow the government to channel targeted support for eligible families who need help caring for their dependents.
4. Relaxed condition on eligibility for Grandparent Caregiver Relief (GCR)
Prior to this change, working mothers could only claim GCR if the caregivers had no income. With effect from YA 2024, such claims will be permissible, provided the caregivers’ income does not exceed S$4,000 in the year preceding the YA of claim.
Building a Giving Society
The weighted tax deduction of 250% for qualifying donations will be extended for another three years till the end of 2026, and will be reviewed thereafter. This move will be welcomed, and it reinforces the Government’s commitment to foster the spirit of giving, to build a gracious and caring society.
Encouraging Flexible Working Arrangements
The Tripartite Standard on Flexi-work arrangements will be implemented in 2024. Such roll-out will require employers to consider staff requests for such arrangements fairly and properly. This move underlines the Government’s supportive stand for flexible working arrangements.
This move is expected to be embraced by most employees, however, employees would wish for more definitive and easy to claim relief to offset their rising costs from working from home. Currently, there are allowable deductions for incremental home office expenses such as electricity charges and telecommunication charges which can be difficult to ascertain. Instead, a fixed work from home deduction on a per day basis could be introduced.
From the employers’ standpoint, considering that flexible work arrangements would be a norm in future, they could consider implementing a formal flexible working policy to provide greater clarity to their employees as well as people managers and HR practitioners around new ways of working.
In closing
Budget 2023’s main focus is to provide assurance and support to local Singaporeans, especially lower and middle income families, and it delivers on this front. The Minister of Finance has indeed offered a nice Valentine Day present to many households, as promised ahead of his Budget Speech.
While the Budget announcements have to be lauded for being forward looking and focused, we were hoping that more could have been done in the following areas:
While taking care of the local population, it is a big part of the Budget 2023 to focus on ensuring Singapore remains relevant and competitive on the global stage, in the face of global competition and challenge to small economies such as Singapore. It is therefore imperative to attract investments and global talent to our shores which in turn will create job opportunities for local Singaporeans in the medium to long term. While there has been introduction of ONEPASS scheme earlier this year aimed at attracting top global talents, another change we were hoping to see is the re-introduction of Not Ordinarily Resident (NOR) Scheme or similar concession that would entice top talent and key executives who hold global and regional roles, to set base in Singapore. To allow a level playing field, such concession could be extended to eligible local talents as well.
Contact us
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