KUALA LUMPUR: For Year of Assessment 2018 (YA2018, Lee Hishammuddin Allen & Gledhill (LHAG) partner S. Saravana Kumar (pix) highlighted several changes and new incentives in relation to personal income tax, namely, the two percentage point reduction in income tax rates for taxpayers earning RM20,000 to RM70,000 annually. The tax rate, which previously ranged from 5% to 16%, has been reduced to 3% to 14%.
In addition, the Inland Revenue Board (IRB) launched a special voluntary disclosure programme to encourage taxpayers to voluntarily disclose income that was not declared or was underdeclared, or tax incentives that were overclaimed.
Other tax incentives for YA2018 include the tax relief of up to RM6,000 for net savings in SSPN, which has been extended for three years (up to YA2020); tax relief for women returning to work upon a career break of at least two years as of Oct 27, 2017; and 50% income tax exemption on rental income, which is effective up to YA2020.
“Taxpayers must be prudent in claiming these deductions in order to maximise the available tax incentives. However, it must be reminded that such incentives should only be claimed where relevant to avoid unnecessary tax audits being carried out by the IRB,“ said Saravana, who advises taxpayers to consult tax agents or tax solicitors if they are unsure of whether the expenses are tax deductible.
Meanwhile, Liew pointed out several key things to remember when planning for tax filing.
“The number one thing that everybody forgets is, the lowest amount that you go without having to pay tax is RM4,120 a month as a salaried worker. What a lot of people assume is that their companies will just deduct for them or not deduct for them. But the thing to remember is that, most companies follow a certain schedule which is prescribed by the government and this schedule is by nature more conservative for the income tax department. What that means is companies start deducting your salary, assuming you are a single working adult with no dependents, at RM3,000. They start auto-deducting from your salary already,“ he said.
“So, it doesn’t matter who you are, if you think you don’t have to pay, you don’t have to file this year, you’re not paying tax, think again; you were. Everyone earning between RM3,000 and RM4,000 must file. Otherwise you don’t get your money back and for this range, it can go up to RM400. There are millions of people earning RM3,000 to RM4,000 in Malaysia who assume they are not paying taxes but they are,“ he added.
He said another common mistake made when filing taxes is omission, as most people cannot remember everything they did the whole year; for example buying a new smartphone and paying for broadband internet. He recommends going through the list of tax reliefs to avoid missing out on any claimable tax reliefs.
Besides omission, Saravana said it is common for return forms to be denied by IRB due to incorrect submission of personal details. Mistakes as minor as a wrong alphabet, number or even spacing may form ground for IRB to reject the return form.
“Taxpayers are advised to check their personal details, especially name and identification or registration number, numerous times. If there has been a change in personal details, taxpayers are required to report to the IRB by submitting a copy of the relevant documents proving such change,“ he said.
Source: The Sun Daily