There’s plenty you can do now to take full advantage of tax reliefs before the year ends.
By Sofea Lee
Instead of waiting until tax season comes around to dig up your receipts and check what you can claim on your return, you can take action this December to guarantee peace of mind, knowing you’ve maximised your benefits. As a freelancer and creative artist, this becomes even more important to ensure that you don’t end up leaving valuable deductions on the table.
To begin, you need to file your taxes if you earned at least RM34,000 during the year (after EPF deductions). However, do take note of these specific exemptions for royalties from the following:
- Up to RM10,000 for the publication of artistic works, recording discs, or tapes
- Up to RM12,000 for the translation of books and literary works
- Up to RM20,000 for the publication of literary works, original paintings, or musical compositions
Now it’s time to take stock of useful tax reliefs that you can still take advantage of before the year ends.
- EPF contributions and life insurance
For non-public servants, you can deduct up to RM4,000 in contributions to EPF each year on your tax return. For those who are self-employed (i.e., you are not an employee of an organisation), EPF’s i-Saraan option even provides an incentive for you to contribute: your account will be credited with an additional 15% of your total contribution in a given year, up to RM300 annually.
Additionally, if you have life insurance or takaful, you can claim up to RM3,000 per year on premiums and contributions paid. If you haven’t already made these contributions and payments, now is a good time to do so.
- Private retirement scheme (PRS)
If you do not make voluntary contributions to EPF but to a private retirement scheme recognised by the Private Pension Administrator Malaysia (PPA), then the annual limit you can claim on your return is RM3,000. If PRS is part of your retirement savings plan, then be sure to max out your contribution this December.
- Insurance for medical or education benefits
Do you have medical insurance? Payments of insurance premiums for medical benefits can be deducted on your tax return, up to RM3,000 per individual every year. Note that this relief is lumped with education insurance, meaning that if you have both medical and education insurance, the total deduction allowed under this category is RM3,000.
- Medical expenses
Even if you have not made any trips to the hospital this year to treat serious diseases, undergo fertility treatment, or get vaccinations, you can still take advantage of other medical tax reliefs offered. You can deduct up to RM1,000 for a complete medical examination and/or a mental health examination or consultation by registered psychiatrists, clinical psychologists, and counsellors.
- General lifestyle purchases
Most taxpayers are eager to maximise purchases in this broad category. Eligible lifestyle expenses include the following:
- Reading materials, i.e. books, journals, magazines, printed newspapers, and other similar publications in both hardcopy and electronic forms (banned reading materials excluded)
- Personal computer, smartphone or tablet (not for business use; additional charges for warranty excluded)
- Sports equipment and gym membership
- Internet subscription billed under your own name
The total tax deduction allowed for this category is RM2,500 per year—so if you aren’t close to the annual limit, consider taking advantage of year-end sales to make that purchase (and be sure to save the receipts)!
While many taxpayers benefitted from the COVID-era additional tax relief of up to RM2,500 specifically for the purchase of personal computers, smartphones, and tablets, this special relief is no longer available beginning YA 2023. The purchase of such devices is now limited to the broader category of lifestyle expenses outlined above.
And remember: in order to claim these tax reliefs on your return, be sure to keep all receipts and statements necessary to support each claim. The Income Tax Act of 1967 requires all taxpayers to maintain records supporting your tax return for a period of seven years. Even if you have already maxed out your contributions or expenses that you can claim, the next best thing you can do is to find and keep the supporting documentation somewhere safe so you can have the paperwork handy when the time comes.
With only one more month until the end of 2023, why not take steps now to get ahead with filing your taxes? Ring in the new year with the knowledge that you have set yourself up for a trouble-free tax season.
Sofea Lee is interested in the intersection of art and community in Penang. She enjoys writing and supporting all artistic endeavours on the island.
Cover image by katemangostar on Freepik.