Is your year-end tax shopping list ready?

Author: Ang Weina

The end of the 2009 is just around the corner. Whilst we start to plan for year-end holidays, Christmas gifts and spring cleaning, there are also year-end tax shopping items which we should get ready for our 2009 income tax return filing. The submission of all income and claims of reliefs and rebates must be made to the Inland Revenue Board (IRB) no later than 30 April 2010. This due date also applies to the payment of balance of tax due.

As announced in the recent 2010 Budget, we can now expect to receive our 2009 Form EA no later than the end of February 2010. Gone will be the days of last minute scrambling to the IRB to submit the tax return or the unexpected crash of the Internet due to the surge of electronic filing. The earlier we file, the earlier Santa IRB will process our refunds, if any.

So, what can we list in our tax shopping list? The Form EA is generally the basis for our employment income reporting. That is something to start with. However, not all of our employment income may be taxable. Run through all the allowances which you receive and see if there are any which would be tax exempt. For example:-

Travelling allowances

Travelling allowance exemption of up to RM2,400 in a year of assessment is available for travel between home and office. Take note that this is only valid from years of assessment 2008 to 2010. Exemption of up to RM6,000 per annum for travelling allowance in respect of official duties is also available. Any amount over and above the maximum exempt amount would be subject to tax, unless there are sufficient disbursement receipts in respect of official duties to claim the entire amount.

Medical benefits

Expenses on traditional medicines such as acupuncture, maternity and ayurvedic treatment are now included as tax exempt medical benefits.

Interest subsidies

Employees who enjoy interest subsidies by their employer on housing, motor vehicles and education loans will not be subject to tax as long as the total loans do not exceed RM300,000. 

Other tax exempt benefits include:-

• mobile phones, telephones, PDAs, pagers provided by the employer, and its bills registered in the name of the employee or employer;
• staff discounts of up to RM1,000 a year on company traded goods;
• staff discounts on services rendered by the company, such as private schools providing free education to children of their employees;
• childcare allowance of up to RM2,400 per year;
• parking fees / allowances;
• meal allowance;
• service excellence awards, innovation awards or productivity awards, past achievement awards, long service awards (for more than 10 years of employment) not exceeding RM2,000 a year.

You will also note a subtle difference in the bank statement as it no longer shows an amount of tax withheld. Individual taxpayers no longer need to pay taxes on interest income as this is exempted from tax. 

A welcome additional deduction for sports enthusiasts – the purchase of sports equipment of up to RM300 for any sports activities as defined under the Sports Development Act 1997. Sports equipment include equipment that have a short life span such as golf balls and shuttlecocks but do not include sports attire. Therefore, be mindful that whilst yoga and Pilates are in vogue, the purchase of yoga attire would not qualify for tax deduction.

There is no harm in starting spring cleaning early. It is also timely to vet through receipts and re look at the available tax deductions and rebates allowed under the Income Tax Act, other than the normal reliefs for self, spouse and children:-

• Medical expenses for own parents certified by a medical practitioner (up to RM5,000 a year);
• Basic supporting equipment for disabled self, spouse, child or parents (limited to RM5,000 a year);
• Disabled person (self) (RM6,000 a year);
• Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications of a Masters or Doctorate level, undertaken for the purpose of acquiring any skill or qualification (restricted to RM5, 000 a year);
• Medical expenses on serious diseases for self, spouse or child (ceiling of RM5,000 a year);
• Complete medical examination for self, spouse or child (up to RM500 a year; total deduction limited to RM5,000);
• Purchase of books / journals / magazines / similar publications for self, spouse or child (limited to RM1, 000 a year);
• Purchase of personal computers for individuals. Deduction allowed once in every three years and limited to RM3,000;
• Net deposit in the Skim Simpanan Pendidikan Nasional (restricted to RM3,000 a year);
• Payment of alimony to former wife (total deduction for wife and alimony payment shall not exceed RM3,000 a year);
• Disabled husband / wife (RM3,500 a year);
• Life insurance and EPF (up to RM6,000 a year);
• Education and medical insurance (ceiling of RM3,000 a year);
• Zakat other than monthly zakat deduction from salary; and
• Fees / levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

With proper planning to set out the tax shopping list, it will no doubt bring good cheer towards welcoming a better 2010 with more dough in our pockets. Haven’t spent enough yet to gain maximum tax relief? Consider accelerating your normal spending to gain receipts dated in 2009. Some may even take steps to have a child born by midnight on 31 December 2009!

The writer, Ang Weina is an Executive Director and Global Employer Services Leader with the tax practice of Deloitte Malaysia.