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Singapore Budget 2015: CPF and Tax changes for the workforce
myBusiness brings you the latest news regarding changes to the CPF scheme and taxes announced during the Singapore Budget 2015 for Singapore.
With each financial year, the government has fine-tuned and tweaked the way the Central Provident Fund (CPF) system so that citizens, from employees to employers, as well as retirees, can benefit as much as possible from the state's social security savings plan.
At the Singapore Budget 2015 Statement presentation on 23 February this year, Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam announced the following enhancements relating to the CPF:
Higher CPF Salary Ceiling for Singaporean workers
With effect from January 1 2016, the CPF salary ceiling will be raised from S$5,000 to S$6,000. The increase is said to be beneficial to around 544,000 Singaporeans including middle-class citizens who will be able to have a larger amount of savings in their CPF accounts.
"Based on the new salary ceiling, a 45-year-old worker who earns $6,000 or more today will save an additional $60,000 by the time he reaches 65," said the minister.
Increase in CPF contribution rates for older workers
From January 1 2016 onwards, CPF contribution rates for workers aged above 50 years to 65 years will see an increase as follows:
CPF contribution rates will be restored for workers aged above 50 to 55 (to the same level as those for younger workers). More specifically, the contribution rates for this group of workers will go up by two percentage points - 1 per cent from the employer, and 1 per cent from the employee, bringing the total CPF contribution rate to 37 per cent.
Workers aged above 55 to 60 will contribute 26 per cent and workers aged above 60 to 65 will contribute 16.5 per cent. The addition in rates for both these groups will be borne by the employer.
The increase in employer contribution rates will be allocated to the Special Account while the increase in employee contribution rates will be allocated to the Ordinary Account.
Additional CPF interest
Starting 2016, an additional 1 per cent extra interest will be paid on the first S$30,000 of CPF balances from the age of 55, on top of the existing 1 per cent extra interest on the first S$60,000 of savings.
Enhancement and extension of the Temporary Employment Credit (TEC) and Special Employment Credit (SEC)
Initially announced during the Singapore Budget 2014, the TEC was introduced to help employers adjust to cost increases associated with the increase in CPF salary ceiling and the employer CPF contribution rates for older workers.
The TEC will see an enhancement (of +0.5 per cent) and extention by two more years with effect from January 2016. The initiative has been extended in order to help employers off-set two-thirds of the employers' costs due to CPF changes in 2016, and one-third in 2017.
The SEC was first introduced in 2011's Budget and enhanced in 2012 to provide employers with more support to hire older low-wage Singaporean workers.
Employers who hire Singaporean workers aged 65 and above (earning up to $4,000 monthly) will receive an additional offset of up to 3 per cent of wages in 2015, meaning companies who employ such older workers would get up to 11.5 per cent (formerly 8.5 per cent) in wage offset in 2015. This enhancement is estimated to cost the Singapore government S$50 million.
Higher income tax for top earners
In a bid to enhance progressivity and strengthen future revenues, the top 5 per cent of high income earners in Singapore (who earn at least S$160,000 per year) will see their personal income tax rate increase.
The marginal tax rate will be raised by two percentage points to 22 per cent for top tier income earners with a chargeable income above S$320,000. Marginal increases will be smaller for those in the top 5 per cent.
"The majority of Singaporeans do not pay income tax, but they pay GST. However, while everyone contributes something for a better Singapore, those who are better-off should contribute more." said the minister, who also added that the move was a calibrated one, and that it should not "significantly dent Singapore's competitiveness".
The full Singapore Budget 2015 speech can be found here: http://www.singaporebudget.gov.sg/budget_2015/pd.aspx