Save $2,070 in your tax

There are lots of ways to save on your tax. Below are some of the easiest way and some with no cash out :)

1) CPF Cash Top-Up Relief

    a) Top-up your own CPF Special Account (SA) / Retirement Account (RA)

        Up to $7,000 relief

    b) Top-up CPF Special Account / Retirement Account for the following:

        - Parents or Parents-in-law

        - Grandparents or Grandparents-in-law

        - Spouse*

        - Siblings*

        Up to $7,000 relief

        *For spouse and siblings, their annual income should not exceed $4,000/year

    Note:

    - Recipient's SA should not be more than FRS ($161,000 as of 2016). Anything above FRS is not tax deductible

    - Details can be found by clicking here: IRAS Link

2) Parent Relief / Handicapped Parent Relief

    Supported the following dependants, whom their annual income is less than $4,000:

      - Parents

      - Grandparents

      - Parents-in-law

      - Grandparents-in-law

    a) Taxpayer stays with Dependant

        $9,000 per dependant

    b) Taxpayer does not stay with Dependant

        $5,500

    c) Taxpayer stays with handicapped Dependant

        $14,000 per dependant

    d) Taxpayer does not stay with handicapped Dependant

        $10,000

    - Details can be found by clicking here: IRAS Link

3) Supplementary Retirement scheme (SRS)

    Up to $15,300

    => Please wait for our next article

Maximize your tax savings:
$11,000 - Grandparents x2

$11,000 - Parents x2

$7,000 - Top up your personal CPF

$7,000 - Top up your parents'/grandparents' CPF

$15,300 - Top up SRS

Total reliefs: $51,300

If your annual income:

    a) >$71,300 ($20k tax bracket + $51.3k) => NO tax at all. You just save yourself $2,741 cash

    b) >$81,300 ($30k tax bracket + $51.3k) => You just save yourself $3,500 cash

    c) >$91,300 ($40k tax bracket + $51.3k) => You just save yourself $4,650 cash

    d) >$131,300 ($80k tax bracket + $51.3k) => You just save yourself $9,645 cash

Current tax rates can be found here: IRAS Link

WHOptimized:
Minimally, assuming your grandparents or parents are no longer working and staying their own, you can save up to $5,500 x2 = $11,000 chargeable income. Top up your own CPF SA and save another $7,000 relief.

If your annual income:
    a) >$58,000 ($40k tax bracket + $18k) => You just save yourself $1,260 cash
    b) >$98,000 ($80k tax bracket + $18k) => You just save yourself $2,070 cash

If you have extra, you can top up your parents CPF or if you parents want to top up their CPF with cash, ask them to go through you and you can save additional $7,000 of your chargeable income.

Invest in ASNB for 6% return - for Malaysians only

ASNB has 2 kinds of funds: Fixed Price & Variable Price funds. We are only interested in the Fixed Price funds where there's no Sales Charge and the NAV is always fixed at RM$1.00. These are "Income" fund types.

There are currently 6 Fixed Price funds where only 3 are opened for non-Bumi investors. There are:
1) Amanah Saham Malaysia (ASM)
2) Amanah Saham Wawasan 2020 (ASW 2020)
3) Amanah Saham 1Malaysia (AS 1Malaysia)

Based on the latest annual report published as of 11 October 2016, these are the comparisons:

As can be seen, the main holdings in the funds are all equities like Maybank, CIMB, Public Bank, Tenaga Nasional, Sime Darby, Axiata. These are all equities that can be found in Bursa - Malaysia stock exchange.

Though they invest in equities, these 3 funds are not "Equities" funds. They are "Income" funds. If it's listed as Equities funds, then the daily price will fluctuates and will show current market price. But for Income funds, the price is fixed at RM1.00 regardless of market condition.

When the market is good, they will give slightly more dividends/net distribution unit and similarly when market is down, it'll give slightly less. They employ a "smoothing" process so as to meet the funds objective which is "to provide regular and consistent income stream whilst preserving the unit holders' investment capital over a long term horizon".

Below is the dividends/net distribution unit given since inception:

As can be seen above, the dividends is still >6%, regardless of any event:
Asian Financial Crisis (1997-1998), 9/11 (2001), Internet Dot-Com burst (2001-2002), Global Financial Crisis (2007-2009). Though the dividends looks like getting lower each year, but it should be still in the area of 6%.

Source: http://www.vantharp.com/Tharps-Thoughts/Weekly_548_Oct_19_2011.htm

If you have read my previous article on Compound Interest (article here), we purposely use 6% so as to simulate how your money will grow under this environment.

If you have put RM$1,000 in 2006 in the Wawasan 2020 funds, without doing anything your money would have double by today in 2016.
And if you diligently top up your Wawasan 2020 funds $1,000 per year which is just $83/month or $2.80/day (kopi cost), your money would have grown to $16,434.

WHOptimized:
Invest in any of the 3 ASNB Fixed Price funds available, full stop!

The funds are limited and sometimes it's rather hard to buy. But persist and you will enjoy the one and only low risk funds that can continuously gives you more than 6% of interest yearly. 

Things to note:

• You can open a new account, subscribe and redeem your investment at any ASNB branches or agents namely Maybank Berhad, CIMB Bank Berhad, RHB Bank Berhad, and Pos Malaysia Berhad. Additional investment also available via online through Maybank2u, CIMBClicks, AffinOnline and RHBNow. Subject to terms and conditions. [source link]
• Minimum initial investment and minimum balance requirement is 100 units which is equivalent to $100.
• The best time to buy is after the dividends/net distribution unit is declared.
• The dividends is based on the lowest amount of units for the month. E.g. if in 1Jan you have 100 units. On 2Jan, you sold 40units (balance 60units). Then on 3Jan, you bought 200units (balance 260units). For the month of January, the dividend is calculated based on 60units only (the lowest in the month). However in February, if there are no transaction done, then the dividend is base on 260units.

=== Who's who ===
1) Amanah Saham Nasional Berhad (ASNB) is a wholly-owned subsidiary of Permodalan Nasional Berhad (PNB).
ASNB is a fund manager that decides where to invest for each of the funds offered and whom declare the yearly dividends/net distribution.
They do not hold any of the stocks or assets.

2) AmanahRaya Trustees Berhad (ART) is 100% owned by Amanah Raya Berhad with paid-up capital of RM1 million.
ART is a Trustee where it holds all the assets and capital that ASNB, as a fund manager, has invested. All investor's money and capital is held here.
Annual Trustee Fees:

• ASW2020 fixed at RM500,000
• ASM maximum RM300,000 (RM300,000 or 0.08% per annum of the VOF, whichever is lower)
• AS1M maximum RM800,000 (Up to 0.08% per annum of the VOF, subject to minimum of RM18,000 per annum)

3) Amanah Raya Berhad or AmanahRaya as we are known, is Malaysia's premier trustee company. AmanahRaya is wholly owned by the Government of Malaysia with 99.99% of its shares held by the Minister of Finance (Incorporated) and 0.01% of its shares held by the Federal Commissioner of Lands.
[Source: http://www.arb.com.my/en/index.asp?fuseaction=Content.View&ID=58]

So if you are worry if your money is safe, we should look at ART instead of ASNB as ART holds your money. Since ART is wholly owned by AmanahRaya which is 99.99% owned by Minister of Finance, we can more or less have a peace of mind that it's rather safe. Worst case scenario would be like 1MDB where Ministry of Finance will take over.
To understand more about "Trustee", can refer to this link from Investopedia.
=== End of Who's who ===

Open New Savings Account with 3.55% Interest Rates

[Updates 31Oct16] For BoC Smartsaver, they have revised their T&C:
As of 1Dec16:
1) Card Spend Bonus: (previously 1.55%)
     - Above $500 to enjoy 0.8% interest
     - Above $1500 to enjoy 1.6% interest
2) Salary Crediting Bonus: (previously 1.00%)

     - Above $2,000 to enjoy 0.8% interest

     - Above $6,000 to enjoy 1.2% interest

3) Payment Bonus Interest: (previously 0.6%)

     - Above 3 bills to enjoy 0.35% interest
Since BoC has upped the requirement, it's no longer worth it. Based on normal salary of $2,000 and expenses of $500, the interest is only 1.95%.
Unless your salary is above $6,000 AND your monthly expenses is above $1,500, then you will get 3.15%.

WHOptimized:
If you are employed full time with a take home pay of >$2,000, opt for OCBC 360 Account. Else open UOB One Account instead.

----------  End for: Updates 31Oct16  ----------


Do you notice that your savings account is giving you less than $1 of interest per month? Or some even less than $10 per year.

Well, this is because normal Savings Account interest rates is just 0.05% per year.

It's "0.05%", not even 0.5%. It's 20x lower than 1%.
It's "per year" and not per month. It's about 0.004% per month. Yup, it's 250x lower than 1%.

Do you know that you can earn up to 71x of your Savings Account interest rate? This means that if you are currently seeing your monthly interest rate of $1 in your monthly statement, you can increase it to $71 per month! Risk free!

Let us introduce to you to these 3 Savings Account:

1) Bank of China (BoC) Smartsaver
(with interest rate from 3.40%~3.55%)
The interest rate given depends on the total balance of your account for the specific month.

2) OCBC 360 Account
(with interest rate of 2.25%)
Though the total is up to 4.2%, but we feel that 2.25% is more practical as the additional 1% interest for investment is hard to achieve, unless you have existing investment or insurance with OCBC.
And the other 1% is on incremental balance only and not on the entire balance. So can treat it as just an "additional bonus" but not a fix bonus.

3) UOB One Account
(with interest rate from 1.55%~2.43%)
Though it shows up to 3.33% the actual total is only up to 2.43% as the interest earned is based on incremental balance.
Having the least interest, it's still good for those whose take home pay is less than $2,000 per month. The interest rate is still 51x higher than your normal Savings Account interest.

Below is the summary of the interest rate earned for the 3 banks above as well as our normal Savings account and Fixed Deposit interest rates for 1 year:

As the interest rates fluctuates depending on the total amount you have in your account, below is the actual interest earned per year based on the respective balance:

So if you have $1000 in your normal savings account, you will just earn a pathetic 50cents a year! That is about 4cents a month!
If you have BoC Smartsaver, you can earn $34 per year or $2.80 per month.



Hope these interest rate excites you. Though it's risk free, but we need to do these 3 simple steps to enjoy this rates to the fullest:
1) First, simple job. After opening the new account, just update your new account details to your HR/Payroll department.

2) Second, simple job. Arrange 3 giro payments. It can be to your mobile phone bills, utilities bill, credit cards payment, etc.
If still less than 3, let us know and we can advise other alternatives.

3) Third, simple~tough "abit" job. Spend $500 per month on any of the credit cards from the bank. If your monthly expenses is less than $500, you can always shift all your giro payment like your mobile phone bills, utilities bill, etc to your credit card.
If still insufficient, let us know and we can advise other methods.

WHOptimized:
So how do you decide which account to open?
Just follow the simple flowchart below:

And remember about "Compound Interest"? If not click here. The additional interest you earn, will further earn more interest for you.

Compound Interest

What is "Compound Interest"?
Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest" and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.
[Source: Investopedia]

For simple interest, if you put in $100 with 6% annual interest, by end of Year 1, you would get $106; end of Year 2, you will get $112; end of Year 3, you will get $118.
Every year you get $6 interest.

For compound interest, if you put in $100 with 6% annual interest, by end of Year 1, you would get $106 (same as normal interest); end of Year 2, you will get $112.36; end of Year 3, you will get $119.10.
If you notice, by end of Year 2, you will get extra $0.36 and by end of Year 3 you will get an extra $1.10 compared with normal interest. This is what compounding is, where your interest earned also earn interest for you (e.g. additional 6% on the Year 1's $6 earned interest). 

Though the difference is not that great for the first few years, but by end of Year 9, you will notice the difference is getting bigger, to be precise 9.7% more. Populated below is the difference of the interest earned between normal interest (in blue) against compound interest (in orange) based on 6% interest:

As you can see that the orange line (which represents the compounding interest) starts to move exponentially as the time goes. Whereas the blue line (normal interest) just goes up in a line.

This is what happen when you leave your interest gained to be reinvested again making the interest that you earned to earned further interest.

This is the power of compounding interest and as quoted by Albert Einstein:
"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it."

About the last few words: "he who doesn't ... pays it." What it meant is that it's also applicable for loans or credit that you borrow. E.g. if you just pay the minimum amount of your credit card bill, your loan amount will be like the orange line above where it'll grow and skewed upwards.

Just to add:

• For Simple Interest, it takes 17 years to double your money at 6% interest, but Compound Interest takes only 12 years. It saves you 5 years!
• By end of Year 21, the interest gained from Compound Interest is 50% more than Simple Interest
• Just add another 9 years, by end of Year 30, the interest gained by Compound Interest is 100% more! That is double the total interest earned by Simple Interest

WHOptimized:

• Leave your interest and let it grow instead of withdrawing the interest earned to spend
• The longer you leave it, the faster it'll grow not diagonally but exponentially as you can see in the graph
• This is how it looks like if you put just $100 from age 20, by the time you retire at 65, you will get $1842 in Compounding Interest instead of just $400 for Simple Interest