Singapore | Employment Tax | Budget 2024—A Vialto viewpoint

Employment Tax

Singapore’s 2024 Budget proposals-A move to bolster Singapore’s standing in the ‘new world’

The summary
In anticipation of a ‘new world’ characterised by increased volatility, fragmentation and instability, the 2024 Budget remains committed to advancing Singapore’s trajectory on the “Forward Singapore” journey. The proposals aim to propel Singapore’s standing in the global economy, concurrently reinforcing the Singaporean core and providing support to the populace amidst the challenges posed by rising cost of living.

The focus for Budget 2024 has been to tackle immediate challenges for households and businesses, equip the local workforce for life, and provide more assurance for families leading to a stronger and more united Singapore.

While the Finance Minister has laid out an extensive package of support measures, some of the noteworthy individual and employment tax focussed fiscal measures are set out below.

The details

Fiscal Measures

Continued increase in CPF contributions for senior employees
In line with the Government’s continued efforts to support senior workers with their retirement goals, CPF contribution rates for senior workers aged 55 to 65 years old will again increase by 1.5 percentage points in 2025. CPF transition offsets will be given to employers to partially cushion the cost impact.

Removal of CPF Cash Top-up relief for Matched contributions
Matched Retirement Savings Scheme (MRSS) has been expanded to Singaporeans aged 55 and above, with the annual matching cap enhanced from S$600 to S$2,000 (subject to a cumulative lifetime cap set at S$20,000). However, the tax relief for cash top-ups under this Scheme will no longer be available. While the substantial increase in matching contributions from the Government is acknowledged, the elimination of tax relief for cash top ups may potentially dissuade taxpayers from opting for making such top-ups for themselves and/or their family members.

Introduction of Overseas Humanitarian Assistance Tax Deduction Scheme
In line with the commitment of fostering the spirit of giving back, the tax deduction of 250% for qualifying donations to local charitable institutions will continue till at least 2026. With various unfortunate events unfolding around the world, the Finance Minister acknowledged that Singaporeans are donating beyond Singapore shores to emergency humanitarian crises across the globe. As such, for the next four years, a 100% tax relief will be allowed for donations to overseas humanitarian causes through selected organisations.

Personal income tax rebate for Year of Assessment (YA) 2024
The 50% tax rebate has made a comeback after 5 years, after being last introduced for YA 2019. This rebate will be given to taxpayers in YA 2024 (relating to calendar year 2023), capped at $200.

Increase in qualifying income threshold for dependent-related tax reliefs
Presently, to be eligible for dependent-related reliefs such as Spouse Relief, Qualifying Child Relief, Grandparent Caregiver Relief, and Parent Relief, the dependent of the taxpayer must not possess an annual worldwide income exceeding S$4,000 in the calendar year. The Budget announcement has revised this qualifying income criterion upwards, expanding it from S$4,000 to S$8,000 effective from Year of Assessment (YA) 2025, corresponding to calendar year 2024.

While the government’s decision to raise the cap for qualifying income levels for dependent-related tax reliefs is commendable, this adjustment should have been accompanied by an increase in the quantum of the respective tax reliefs, as well. Such an increase would have alleviated the tax burden on caregivers, and somewhat cushioned the augmented costs associated with supporting dependents.

Removal of Course Fee relief
Starting from Year of Assessment (YA) 2026 (i.e. with effect from 1 January 2025), the Course Fee Relief, which is currently capped at S$5,500, will no longer be available. However, eligible individuals can still benefit from targeted direct subsidies for lifelong learning and upskilling through various Government initiatives such as course fee subsidies for SkillsFuture Singapore-funded courses, SkillsFuture Credit, the SkillsFuture Career Transition Programme, and Career Conversion Programmes.

Nonetheless, the discontinuation of the relief may come as a disappointment for non-Singapore citizen executives who are not eligible for such government programs, especially since many executives often pursue educational programs and course studies for their continuous upskilling.

In conclusion
The forward-looking Budget announcements centre on charting a course for Singapore in the New World. The key objectives include fostering economic growth, empowering Singaporeans of all ages to fulfil their potential, and providing them support to navigate through challenges. The overarching vision is to cultivate a sense of optimism and unity, as Singapore collectively moves towards a more hopeful future.

However, we are left wondering whether more could have been done in the following areas:

• Currently, the first S$20,000 of chargeable income is taxed at 0%. It is time that this threshold be re-visited to better reflect the economic realities, ensuring that tax policies remain equitable and responsive to the evolving financial landscape.
• In this modern and progressive society, where there has been great emphasis and efforts placed on gender equality and inclusivity, we believe that tax reliefs should be more gender-neutral and not skewed towards a specific gender. For example, relief for life insurance premiums purchased for one’s spouse is currently only available to married men and not extended to married women.
• In the face of increasing housing costs and a surge in mortgage interest rates, tax relief for mortgage interest on first owner-occupied homes could provide meaningful assistance to individuals navigating the challenges of housing affordability, especially for the low to middle-income class. This is also aligned with the government’s desire to promote and support home ownership for all Singaporeans.
• Introduction of reliefs for medical and health insurance premiums for both individuals and their dependents should be earnestly considered. Such incentives are crucial to encourage people to prioritise their health and ensure coverage for themselves and their dependents. By providing tax reliefs for medical insurance premiums, the government can play a pivotal role in fostering a culture of health protection and well-being while also reducing reliance on Government-funded/ subsidised medical treatment programs.
• Following Prime Minister Lee Hsien Loong’s clarion call to Singaporeans to help boost the birth rate especially in the auspicious Year of the Dragon, there had been widespread anticipation and speculation on what measures will be introduced in this Budget. However, no direct initiatives were announced, leaving aspiring parents-to-be yearning for more.
• More initiatives should be introduced to further enhance Singapore’s position as a global and regional talent hub. As the Not Ordinarily Resident (NOR) scheme has now lapsed, Singapore-based employees who travel overseas for business purposes currently do not enjoy any tax reliefs. We are hopeful that a similar concessionary scheme will be re-introduced in future and the benefits will also be made available to Singapore citizens, who seldom qualified under the previous NOR scheme.

Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Sakaya Johns Rani
Partner

Yang Li
Partner

Margaret Duong
Partner

Grace Huang
Partner

Further information on Vialto Partners can be found here: www.vialtopartners.com

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