What you need to know on Malaysia’s new personal tax relief changes, dividend tax, and T15 income classification.

A. Personal Tax Relief Updates & Changes

Several personal tax reliefs have been extended or revised to provide relief for individual taxpayers:

A1. Private Retirement Scheme (PRS)

RM3,000 tax relief extended until 2030.

A2. National Education Savings Scheme (SSPN Prime)

RM8,000 tax relief extended until 2027. But only one parent (previously both) can claim this relief.

A3. Childcare (Taska / Tadika)

RM3,000 tax relief for fees paid to childcare centre and kindergarten extended until 2027.

A4. Education and Medical Insurance

Increase in tax relief limit for medical and education insurance premiums increased from RM3,000 to RM4,000.

A5. Sports Lifestyle

RM1,000 sports lifestyle tax relief expanded to include purchase of sports equipment and activities for parents.

A6. Medical Expenses

Full medical check up and vaccination medical expenses RM1,000 tax relief expanded to parents and grandparents.

A7. Disabled (OKU)

There is increased financial relief to families with disabled members:

  • OKU relief increased to RM7,000.
  • Additional spouse relief for OKU increased to RM6,000.
  • Unmarried OKU children relief increased to RM8,000.
  • Medical expenses relief for autism increased to RM6,000.

A8. Environment

RM2,500 tax relief for EV chargers expanded to now include food waste composting machines for household use until 2027.

B. New Personal Tax Relief

B1. Housing Loan Interest Relief

For those buying their first residential home for own stay (not rented out), tax relief will be available on housing loan interest payments:

  • Property valued at RM500,000 or less: RM7,000 per annum for 3 years
  • Property valued between RM500,0001 to RM700,000: RM5,000 per annum for 3 years.

C. New Dividend Tax

Starting from year of assessment (YA) 2025, individual shareholders in Malaysia with an annual dividend income exceeding RM100,000 be taxed at 2%. This will apply to chargeable dividend income, calculated after accounting for applicable allowances and deductions.

Certain dividend incomes are also exempt from this tax, including:

  • Dividends from institutions such as EPF (Employees Provident Fund) and LTAT (Tabung Angkatan Tentera).
  • Dividend income from overseas.
  • Dividend from ASN (Amanah Saham Nasional) & unit trusts.
  • Dividends from companies that have received pioneer status or reinvestment allowances.
  • Dividends distributed from profits of shipping companies that are tax-exempt.
  • Dividends distributed by cooperatives.
  • Dividends declared by closed-end funds.
  • Dividends received by residents from Labuan entities.
  • Dividend exemptions granted at the shareholder level.

D. Other Notable Updates

D1. EPF Contribution

i-Saraan government matching incentive increased from 15% to 20%. This is subject to a maximum RM500 per year (contribution of RM2,500), and lifetime limit of RM5,000 per individual.

Note: minimum age 14 above are able to open a EPF account, and maximum age for contribution of age 75  

D2. Foreign Source Income Tax Exemption

Tax exemption on foreign income sources for individuals extended to 31 December, 2036.

D3. Insurance and Takaful Stamp Duty Reduction

Stamp duty on the deed of assignment for life insurance and takaful for estate planning will significantly be reduced, after a significant increase in recent years.

  • First RM100,000: RM10 (previously 1% of sum assured).
  • RM100,000 to RM500,000: RM100 (previously 2% of sum assured).
  • RM500,000 to RM1 million: RM500 (previously 3% of sum assured).
  • Above RM1 million: RM1,000 (previously 4% of sum assured).

D4. Minimum Wage Increase

The minimum wage will rise from RM1,500 to RM1,700 starting February 1, 2025, providing an immediate boost to disposable incomes.

This will likely have a spillover impact to overall wage increases too.

D5. Sugar Duties & Sales Tax on Premium Foods

Excise duty on sugar will rise to RM0.40 per liter starting January 2025.

A new 5% – 10% expanded SST (sales tax) on non-essential imported food items, with premium items examples of salmon, avocado, and wagyu beef starting May 2025.

 

E. New T15 Classification

Previous income classifications were in 3 segments B40 / M40 / T20. The new classification will target T15 which is estimated to affect 3% of tax payers.

M40 households will be least affected by subsidy cuts. Only the top 15% will bear the brunt of subsidy rationalisation where household income will be a key (but not only factor) in determining subsidy qualification. Also ministers have come out to say will look at other factors too besides income, and will also take into account household spending.

The government plans to reduce operating costs by phasing out certain subsidies, starting with RON95 petrol by mid-2025. Expect transportation and related costs (i.e. food prices) to rise. There were also indications of rationalising subsidies in education (especially higher education) and hospitalisation for T15.

Conclusion

Positives include the expanded and extended tax relief in multiple categories. The introduction of new taxes, and subsidy rationalisations will affect many directly or indirectly in 2025.

 

If you need tailored advice on how to optimise your financial plans to these latest budget changes, feel free to reach out to a licensed financial planner for holistic unbiased fee-based advice.

 

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