Singapore Budget 2023 and beyond

Key changes announced for individuals

• Change in method of calculating WMCR

  • WMCR was to encourage married mothers to remain in the workforce. It was exclusive to female taxpayers whose children were Singapore Citizens.
  • The amount of relief was previously a percentage (15% to 25%) of the mother’s earned income. It was capped at SGD 50,000 per child (inclusive of any qualifying or handicapped child relief).
  • The change is applicable to children born or adopted on or after 1 January 2024. The relief will be changed to a fixed dollar amount, and this will be SGD 8,000 for the 1st child, SGD 10,000 for the 2nd child, and SGD 12,000 for the third and subsequent child.
  • There is no change to the WMCR that a female taxpayer can claim for children born before 1 January 2024.
    Observation

    WMCR can be a significant relief for qualifying female taxpayers, especially so for higher income earners given the calculation used to be based on a percentage of their earned income. The change will benefit the lower-middle income earners in line with the government’s efforts to support and encourage them to remain in the workforce.

    WMCR would impact more of the local workforce, as a condition to claim this is that the child needs to be a Singapore Citizen. Therefore, this may impact outbound assignees more as it could significantly impact the level of hypothetical taxes due whilst on an overseas assignment.

    Overall, higher income earners will feel a rather substantial reduction in the reliefs claimable, and this appears to be in linewith the government’s efforts to create a more progressive tax system.

• Updated conditions to GCR claim

  • Previously, caregivers who were earning income from carrying on a trade, business, profession, vocation or employment, were not be able to claim GCR.
  • Caregivers will now have the flexibility to earn income, subject to a SGD 4,000 annual cap in the year proceeding the YA of claim. GCR can be claimed if all other qualifying conditions are met.
• Lapse of FDWLR

  • This relief is exclusive to qualifying female taxpayers. It is offset against their earned income. The relief is two times the levy paid in the relevant basis period.
  • Since the implementation of FDWLR, the government has also introduced other direct support measures for working mothers, including a concessionary rate of migrant domestic worker levy.
  • This relief will lapse from YA 2025 for all taxpayers.
    Observation

    FDWLR is a relief that expatriates can enjoy on the levies paid and the lapse of this will see one less relief applicable forexpatriates. However, given the quantum of relief, this may not be a significant impact to the expat population.

• Changes in CPF

  • The CPF monthly ceiling will be raised from SGD 6,000 to SGD 8,000. This will happen progressively from 2023 to 2026.
  • The current total contribution ceiling will remain at SGD 102,000 for now, but it is expected that this will be revised in due course.
  • For senior workers between 55 and 70 years old, the CPF rates will increase by between 1% and 1.5%, effective 1 January 2024. The government will provide employers with a one-year CPF Transition Offset equivalent to half of the 2024 increase in employer’s contribution rates to this group.
  • The Minimum CPF monthly payout will be raised to SGD 350 from 1 June 2023 for all seniors on the retirement sum scheme.
    Observation

    CPF is only applicable to Singapore Citizens and Singapore Permanent Residents. However, changes may impact the cost of expat packages where employers will provide the equivalent of CPF in a cash allowance or otherwise to ensure that employees on work passes are no worse off than locals (i.e., losing out on employer CPF). This is because CPF contributions are made into the individual’s own CPF account rather than to a state-run social security system.

    Employers should revisit their payroll calculations and alsobe aware of the adjustments to the Annual Wage cap as a result of the first change implemented in September 2023.

    This will increase the overall cost of hiring for employers and reduce the take-home-pay for employees, especially those earning greater than S$6,000. The staggered increments should allow all to manage the changes.

    For outbound assignees, it will have an impact where hypo or actual CPF contributions continue in Singapore. This is a consideration for both the employee and the employer (where actual CPF contributions are made.)

• CPF contributions for platform workers

  • As part of the government’s efforts to align the CPF contribution rates, platform workers below the age of 30 will be subject to mandatory contributions to their CPF Ordinary and Special Accounts, effective late 2024 onwards. Platform workers above 30 can opt into the scheme.
  • This is aimed at boosting savings for retirement and housing needs.
  • As part of transitional support for those earning SGD 2,500 or less per month, the government will introduce the PCTS to offset part of the platform worker’s share of CPF for the first four years.