This Week at a Glance…

i) 15th May 2024 is the deadline to file your taxes for YA2023.

Though the reliefs are mostly similar to YA2022, there are a few notable differences that you should be aware of.

ii) The depressing reality of graduating today.

65.6% of fresh grads earned less than RM2,000 per month in 2021. Wages have been stagnant at this range for over a decade.

Scroll down to read the details.

How do I know if I need to file tax?

You must register a tax file if your annual income is more than RM34,000 (or RM2,833 per month) after EPF deductions.

When calculating your annual income, it’s important to include all sources except those that are exempted from tax.

Taxable income:

• Bonuses

• Basic salary

• Rental income

• Side-hustles/part-time jobs

Exempted from tax:

• Tabung Haji

• Fixed Deposit

• ASB/ASM/AHB

• Dividends from shares

• Gifts from family members

• Capital Gains from selling shares

• Interest earned from licensed cash apps (Versa, Rize, etc.)

When filing for tax, you don’t need to include income that is exempted from tax.

As much as possible, you want to maximize your tax reliefs so you can reduce your total chargeable income and pay less in taxes.

The best-case scenario is to fall into a lower tax bracket entirely.

In some cases, you can save up to 80% in taxes.

Notable tax reliefs that you should be aware of

G1. Individual relief: RM9,000

Just by completing the tax form, you’re automatically eligible for a tax deduction of RM9,000.

This relief has already been filled, so you don't need to do anything.

G5. Education relief (self): up to RM7,000

If you’re paying to further your studies at a recognized local institution, you can claim this relief.

Recognized courses can also be claimed as part of this relief, up to RM2,000 for YA2022 and YA2023.

G6, G7, G8: Medical expenses: Combined value ≤RM10,000

Apart from serious diseases and fertility treatment, you can claim part of this relief for vaccinations, medical examinations, and test kits. In addition, the coverage has been expanded to include children with learning disabilities.

i) Up to RM1,000 for vaccination costs (self, spouse, or child).

ii) Up to RM1,000 for Covid tests, medical/mental health examinations (self, spouse, or child).

iii) Up to RM4,000 for the assessment of learning disabilities such as autism, ADHD, and down syndrome for children aged 18 and below. Early interventions and recovery programs can also be claimed.

G9. Lifestyle relief: Up to RM2,500 (+RM500)

• Any reading materials (hardcopy or electronic)

• Computers, smartphones, or tablets for personal use

• Sports equipment/activities, gym memberships

• Internet subscriptions (under your name)

Remember, you can claim this relief for yourself, spouse, or children. There is also an additional RM500 relief for sports activities and equipment, as listed in G10.

G17. Life insurance (up to RM3,000) EPF (up to RM7,000)

Combined value: ≤RM7,000

You can receive up to RM3,000 in tax relief for life insurance premiums, Takaful, and voluntary EPF contributions.

In addition, you can claim up to RM4,000 for voluntary and mandatory EPF contributions.

Example 1. Your mandatory contributions to EPF were RM16,000 in 2023. You also voluntarily contributed RM5,000.

In this case, you’re eligible for RM7,000 in reliefs (RM4,000 is for mandatory, while the remaining RM3,000 is for voluntary).

Here’s another example:

Receipts how?

You must keep all records that support your claims for up to 7 years.

Be sure to store all documents, including statements, invoices, and receipts properly.

This will help you in the event of an audit by tax agents in the future.

You need to file taxes even if you don’t qualify for any reliefs.

As long as your annual income is above RM34,000, you are expected to file your taxes on time to avoid penalties.

Access to BE2023 form here.

Read the explanatory notes here.

Graduating today is tough.

According to a recent report published by the Khazanah Research Institute (KRI), 65.6% of fresh grads earned less than RM2,000 in 2021.

Only 10.8% (or 11 in 100) of them had a starting pay of more than RM3,000.

Among those that are paid below RM2,000, 48.5% of them are in high-skilled jobs.

Crazy, isn’t it?

The wages of fresh grads has also been stagnant at the RM2,000 range for over a decade, where inflation, ringgit depreciation, and political strife reign supreme.

At this rate, how can we expect youngsters to accept a low starting pay to gain more experience?

It’s no surprise why many are forced to work 2-3 side hustles these days.

Fresh grads are also becoming increasingly overqualified for their work.

Almost half of them were in jobs that do not fully utilize their talents.

KRI explained that fresh grads are struggling to find jobs that match their skills.

As a result, they’re forced to accept low-paying positions to avoid unemployment.

From 2010 to 2021, some industries saw a spike in graduates receiving a low starting pay.

These include:

• Health and Welfare

• Agriculture and Veterinary

• Education

Though the education field has often been perceived as a more ‘stable’ or ‘promising’ job, research shows otherwise.

More than 7 in 10 graduates in this field earned less than RM2,000 in 2021, a significant increase compared to 2010.

Why is this happening??

KRI explained that these alarming issues stem from:

• ineffective education system

• inefficiencies in utilizing public & private resources.

• uneven labour allocation

Among other factors.

Skilled Malaysians are often exploited and heavily underpaid because employers fail to leverage their capabilities.

What can I do if my starting pay is low?

i) Implement the progressive wage model on yourself.

Another reason for the country’s stagnant wages (apart from the factors above) is the lack of a wage system that rewards employees as they improve their skills.

Rather than relying on politicians or employers to change the system, you can implement the progressive wage model on yourself.

Take online courses, learn how to master PowerPoint, Excel, or Word - do something that will make you more efficient at your work.

With that, you’ll become indispensable to your employer and be able to negotiate a better salary.

If your employer refuses to raise the bucks, you can always walk away and find a higher paying job.

A Facebook user recently shared how he managed to amass RM1 million in his EPF account by the age of 45.

He said that he changed jobs eight times, asking for a higher salary from the new employer each time.

ii) Live slightly below your means.

If you earn RM2,400 per month but live like someone who earns RM2,200, that’s RM200 saved every month, which will go a long way towards your financial freedom.

The additional balance could be used to build an emergency fund, pay off your outstanding debts, or invest to generate more income.

iii) Invest. Invest. Invest.

You’ll never achieve financial freedom just by working 9-5.

You need to own an equity or a piece of business that can make money even when you’re sleeping.

The key is to start early and save whatever you can. Here are a few additional resources that will help you:

• Learn how to invest in the US market.

• 5 best places to store your savings right now.

• How to achieve RM100,000 by 35.

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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