Malaysia Budget 2014 Review – GST, Cost of Living, BR1M etc

The Malaysia Budget 2014 was tabled on 25 October 2013 by the Finance Minister (and Prime Minister) of Malaysia, Najib Tun Razak. It’s contents were widely anticipated by both the discerning public and the press, and here at SaveMoney.my we are thrilled to be able to give you the lowdown on what the Malaysia Budget 2014 means for you.

budget 2014

What is the Malaysia Budget 2014?

Every year (in September or October), the Finance Minister will present a report on the Malaysia’s finances, as well as certain fiscal (spending) policies that the government intends to undertake in the next year (so the Malaysia Budget 2014 is to tabled in October 2013 and spells out how the government will change any tax and spending policies for the year 2014.

For a full rundown of the Malaysia Budget 2013, check out our full summary last year here.

How does the Malaysia Budget 2014 affect me?

As always, most items in the budget are related to spending at the national level, with portions for development, healthcare, education, defense and more. Having said that, most consumers generally look for items which directly affect their everyday lives, such as handouts, tax changes, subsidy rationalisation and other consumer related items. At SaveMoney.my we’ll focus on those items in our review.

Cash and Voucher Handouts

Cash and Voucher Handouts

In the Malaysia Budget 2014, as per the previous 2 years, there were various cash handouts for the lower income group, students and more:

BR1M 3.0 - Cash Handouts for RM4,000 / month income earners and below

Bantuan Rakyat 1Malaysia or BR1M was introduced in 2011 at an amount of RM500 for households earning RM3,000 / month and below, and with BR1M 2.0 in 2012 an additional amount of RM250 was introduced for singles above the age of 21 who earn less than RM2,000 a month.

This policy is extended even further in BR1M 3.0, with RM650 to households earning RM3,000 / month and below, and RM300 to singles over 21 years old who earn less than RM2,000 a month. In addition, RM450 will be given to households with income between RM3,000 – RM4,000 a month.

Additionally, RM50 of income protection insurance (with coverage up to RM30,000 for death and permanent disability) will be given to all households with income below RM4,000 / month, taking the total benefit to RM700 for those RM3,000 and below, and RM500 for RM3,000 – RM4,000 / month families. To summarise:

BR1M 3.0Amount
Eligibility Criteria
HouseholdsRM6501. Household income below
RM3,000
2. Malaysian Citizen
3. Only successful applicants will be eligible to claim payment.
RM4501. Household income between RM3,000 to RM4,000
2. Malaysian Citizen
3. Only successful applicants will be eligible to claim payment.
Additional RM50 Group Takaful Rakyat 1 Malaysia Contribution (i-BR1M)
IndividualsRM3001. Total gross monthly income of RM2,000 and below
2. Malaysian Citizen
3. Aged 21 and above (born 1993 or earlier)
4. Does not include students who are receiving the 1 Malaysia Book Voucher (BB1M)
5. Only successful applicants will be eligible to claim payment.

I am eligible for BR1M 3.0, how do I get this handout, and when?

While no firm dates have been announced yet, we expect the payout to commence in January 2014. We expect that people who have already registered and applied for BR1M  and BR1M 2.0 last year will have already been registered for BR1M 3.0, and will be informed of their eligibility by January 2013, and people who didn’t can start applying in November/December 2013 through District Offices, State Development Offices and LHDN offices throughout the country or online. For more information on last year’s processes you can check out our full BR1M 2.0 guide here.

Schooling Assistance - RM100 for Primary and Secondary School Students

A continuation of Budget 2012′s and Budget 2013′s policies, with RM100 to be disbursed to all primary and secondary level students (about 5.4 million of them) starting January 2014. The cash voucher may be claimed directly from schools by parents and children.

BB1M - RM250 Vouchers to University Students for Books and Study Materials

A continuation of Budget 2013′s policy of giving out Baucar Buku 1Malaysia or BB1M, with RM250 of bookstore vouchers to be disbursed all tertiary level students starting January 2014. For more information on how collection, exclusions and various terms and conditions of this voucher were done last year, you can check out our BB1M guide here.

Civil Servant Bonuses - One off half-month bonus in January 2014

A half-month’s bonus for all government staff (with a minimum of RM500) was announced to be given in January 2014.

RM250 one off payment to Retirees

A one of RM250 cash handout will be given to all retirees. No news yet on implementation but we will be sure to update this when it happens.

Income Tax Policy Changes

Income Tax and Policy Changes

In the Malaysia Budget 2014, there were several changes in income tax rates and policies for both individuals and corporates, however a note of caution, this policy only affects income tax earners in 2015 (filing in 2016) and for corporates in 2016 (filing in 2017).

Decrease in Personal Income Tax rates by 1%-3% across Bands

A decrease in income tax rates across the board from assessment year 2015 onwards, with the effect supposedly meaning that households earning around RM4,000 a month and below will pay no income tax. In truth the number is probably closer to RM3,600 / month (unless (depending on how many children a household is assumed to have, 5 kids make the RM4,000 more accurate), but at least there are savings across the board for all taxpayers:

Chargeable IncomeTax Rate (2013 and 2014)Cumulative TaxTax Rates (2015 - )Cumulative TaxSaving
From RM1 - RM5,0000%RM00%RM0-
From RM5,001 - RM20,0002%RM300 (RM0 after RM400 rebate)1%RM150 (RM0 after RM400 rebate)-
From RM20,001 - RM35,0006%RM1,200 (RM800 after RM400 rebate)5%RM900 (RM500 after RM400 rebate)RM300
From RM35,001 - RM50,00011%RM2,85010%RM2,400RM450
From RM50,001 - RM70,00019%RM6,65016%RM5,600RM1,050
From RM70,001 - RM100,00024%RM13,85021%RM11,900RM1,950
From RM100,001 - RM250,00026%RM52,85024%RM47,900RM4,950
From RM250,001 - RM400,00026%RM91,85024.5%RM84,650RM7,200
RM400,001 and Above26%25%

For more on 2013 Income tax rates and how to calculate yours, check out our Income Tax Guide in Malaysia 2013.

Addition of 2 Personal Income Tax bands

Two more tax bands were added to the list, with 2 top earners now at RM100,001 – RM250,000 andd RM250,001-RM400,000. This move brings more upper-middle class families into the fold, creating tax rate differentials between those middle/upper-middle class families and the rich (assumed by the government here to be earning more than RM400,001 per year).

No need tax filing for employees who contribute monthly via PCB/MTD system

Income tax return submission was previously compulsory for taxpayers (those currently earning RM2,500 and above / month), but under the new policy, employees in private and public sector will now not be required to submit tax forms (Borang BE) if they are paying tax through their companies PCB/MTD deduction system.

In truth however, most people who pay tax under the PCB/MTD deduction system will WANT to continue filing, as there are many tax reliefs and deductions that aren’t reflected in their companies’ PCB/MTD system (such as books, broadband and more, see our  Income Tax Guide in Malaysia 2013 for more info), and many can get money back through tax refunds at the end of the tax year.

Because of this, we feel this is a bit of a gimme, but then again, for taxpayers who don’t forsee taking advantage of tax reliefs, this may be a welcome convenience.

Decrease in Corporate Income Tax rates by 1% across Bands

For assessment year in 2016, corporate tax rates have been reduced by 1%, that is from 25% to 24% for taxable income above RM500,000 and 20% to 19% for taxable income between RM0 and RM500,000.

Property Affordability and Property Tax Policy Changes

Property Affordability

Property affordability and availability had been a major issue leading up to the Malaysia Budget 2014, and many issues were addressed including:

PR1MA -> Commitment under the scheme to build 80,000 affordable homes

MyHome -> RM30k subsidies to developers to build low and medium-cost housing

DIBS -> stopping home loan issuance to properties under the Developer-Interest-Bearing-Scheme

Foreigner Purchase Price Limit -> Limiting purchases of property by foreigners in Malaysia to over RM1 million in value

RPGT – Increase in Real Property Gains Tax to curb Property Speculation

RPGT in Malaysia has been increased across bands in 2014 effective for disposals starting from 1st January 2014, with the top rates at 30% for the first 3 years, dropping to 20% and 15% in the 4th and 5th years. The 0% rate was kept for properties disposed after 5 years of ownership. For more information, take a look at our Real Property Gains Tax in Malaysia article.

RPGT for IndividualsDisposals on Oct-95 to Mar-07Disposals on Apr-07 to Dec-09Disposals on Jan-10 to Dec-112012 Budget2013 Budget2014 Budget
Disposal in 1st year
30%
0%
5%
10%
15%
30%
Disposal in 2nd year
30%
0%
5%
10%
15%
30%
Disposal in 3rd year
20%
0%
5%
5%
10%
30%
Disposal in 4th year
15%
0%
5%
5%
10%
20%
Disposal in 5th year
5%
0%
5%
5%
10%
15%
Disposal in 6th year and beyond
0%
0%
0%
0%
0%
0%

For foreigners, the rate for RPGT was increased to 30% for the first 5 years, with a 5% rate for disposals after 5 years.

GST (Goods and Services Tax)

GST

The single largest and divisive issue in the Malaysia Budget 2014 announcement was the introduction of the GST and abolishment of the 10% Sales Tax and 6% Service Tax (SST) starting 1 April 2015. The GST was such a large issue that we have used a whole article to cover it in our GST in Malaysia guide.

In short, a 6% GST rate was introduced starting 1 April 2015, affecting businesses and the public alike. As a whole, whether prices will increase or not directly as a result of the GST being introduced will depend on the following:

1. Items affected by 10% Sales Tax or 6% Service Tax -> May result in reduction of prices, or at least no change

2. Items which are not affected by 10% Sales Tax or 6% Service Tax -> May result in price increases

3. Items which were exempt from 10% Sales Tax or 6% Service Tax but not exempt from GST -> May result in price increases

The list of exemptions for GST are fairly large, but they generally cover essential items such as flour, cooking oil, sugar, salt, public transport tickets etc.

Healthcare and Welfare Benefits

Healthcare and Welfare Benefits

A couple of things on health and welfare matters were pointed out in the Malaysia Budget 2014, we’ve covered them below:

Removal of sugar subsidy of 34 sen

The last remaining bit of sugar subsidies were removed in the Malaysia Budget 2014, bringing sugar prices in Malaysia to RM2.85 / kg as of October 2013, supposedly to reduce the nation’s sugar intake and prevent future heart disease and diabetes.

Addition of 50 Klinik 1Malaysia throughout the country

In the next year, the government is committed to set up a further 50 clinics giving RM1 consultation and treatments.

Child Welfare Benefits

A number of child welfare benefits were introduced and extended, particularly a RM180 subsidy off nursery fees for civil servant households earning between RM3,000 and RM5,000 a month sending their children to state-funded nurseries, with RM250 /month going to households earning less than RM900 a month with children attending privately funded (but JKM registered) nurseries.

Investment and Retirement

Investment & Retirement

There were some items in the Malaysia Budget 2014 relating to the EPF and PRS, with issues from contribution to investment tackled:

SP1M - Skim Persaraan 1Malaysia for Self Employed EPF Contributions

The SP1M was introduced in 2010, aimed at encouraging self employed and freelance workers to voluntarily contribute to the EPF (KWSP). For exactly how the KWSP works, check out our EPF guide here.

To further encourage more to participate in this scheme, the Government’s proposal was to increase government contribution from 5% to 10% or from a maximum of RM60 to RM120 per year.

RM500 incentive for PRS scheme entrants with RM1,000 investment and above

A one off incentive of RM500 was announced for PRS scheme contributors with a minimum of RM1,000 investment and above for individuals between 20 and 30 years of age with the eligibility period starting 1 January 2014 for a period of 5 years. So if you haven’t yet, you can be eligible if you start saving in private PRS within the next 5 years.

Take a look at our Private Retirement Scheme (PRS) – A Guide to Malaysia’s Voluntary Private Retirement Scheme article for more information.

 

So there you have it, the full rundown on how the Malaysia Budget 2014 affects consumers and how you can benefit. For any questions on implementation, ask us in the Comments section below!

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