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6 Things From Singapore Budget 2022 That Will Affect You Financially

Things to note from Budget 2022
Things to note from Budget 2022

The theme for Singapore Budget 2022 is “charting our way forward together” – pointing to a post-COVID-19 budget. During the close to two hour Budget Statement in Parliament, Minister for Finance Lawrence Wong covered essential ways Singapore will be readying herself for the post-COVID-19 world.

As with any budget announcement, there were key announcements that would impact Singaporeans. In this article we look at 6 things from the Singapore Budget Statement 2022 that will affect our financial lives.

Read Also: Singapore Budget 2022: Live Coverage And Real-Time Commentary

#1 GST Will Is Going Up From 2023, In A 2-Step Process, In Line With The Original Schedule

Prior to the Budget Statement being announced, there was already a lot of online discussion about the GST going up from 7% to 9% – on mainstream media and even on the Ministry of Finance Facebook page itself.

This increase is nothing new. It was first mooted in Budget 2018, scheduling to be introduced anywhere from 2021 to 2025. The last increase in GST was in 2007, when it was raised to the current 7%, from 5%.

During Singapore Budget 2022, Minister for Finance Lawrence Wong stated that GST will go up from 1 January 2023, from 7% to 8%, and a second increase will happen on 1 January 2024, taking the GST rate up from 8% to 9%.

This means we are on course to raise GST to 9% within the original scheduled timeline announced in 2018.

In 2021, the government’s collection of GST is estimated to be $12.8 billion. Simplistically looking at the numbers, when GST is raised to 9% by 2024, the collection should increase to about $16.5 billion – or about 30% more. Of course, certain subsidies to help Singaporeans mitigate the increase of GST will mean that the government does not keep the full amount.

#2 Assurance Package Will Offset The Effects Of GST Increase

As mentioned in the point above, the government will be distributing subsidies to help Singaporeans cope with the increase in GST. This will be in the form of a $6.6 billion Assurance Package.

Under the Assurance Package, there will be a:

  • Cash payout of $700 to $1,600 over the next 5 years for all Singaporean adults

  • GSTV – Cash (Seniors’ Bonus) payout of $600 to $900 over the next 3 years for eligible seniors above 55

  • Additional GSTV-U-Save rebates of $330 to $570 over the next 4 years for eligible HDB households

  • MediSave top-ups worth $450 over the next 3 years for Singaporean children aged 20 and below and seniors aged 55 and above

  • CDC Vouchers worth $400 in 2023 and 2024 for Singaporean households

For majority of Singaporean households, these payouts will cover at least 5 years of additional GST expenses. For lower-income households, they will likely receive more, and thus cover the additional GST expenses for up to 10 years.

#3 Permanent GSTV Scheme Will Be Enhanced

Singapore already has a permanent GST Voucher (GSTV) scheme, introduced in Budget 2012, to help lower-income households to cope with costs. The GSTV includes 3 components:

  • Cash – paid out in August each year

  • MediSave – providing elderly Singaporeans aged 65 and above with a CPF MediSave top-up in August each year

  • U-Save quarterly payouts to lower- and middle-income households to offset their utility bills

In Budget 2022, this scheme will be permanently enhanced in 3 ways:

  • Service & Conservancy Charges (S&CC) Rebate will be made a permanent component of GSTV

  • For the cash payouts, the Assessable Income threshold will be increased from $28,000 to $34,000, covering more Singaporeans

  • The amount of cash payouts will also be increased to $500 for those residing in homes with Annual Value (AV) of $13,000 and below, and to $250 for those residing in homes with AV $13,000 to $21,000

#4 Lower-Wage Workers To Benefit From Extended Progressive Wage Model (PWM) and Workfare Income Supplement (WIS)

The Progressive Wage Model (PWM) will be extended to more sectors and occupations over the next 2 years. This will include the retail, food services and waste management sectors, and to occupations such as cleaners, security officers, landscape workers, administrators and drivers working across any sector.

In line with this, the Progressive Wage Mark or PW Mark will also credit firms that pay the Progressive Wage and the Local Qualifying Salary (LQS). From March 2023, the government will require all eligible suppliers to be credited with the PW Mark.

Complementing this, Workfare Income Supplement (WIS) will also be enhanced. From 1 January 2023, the qualifying income cap will be raised from $2,300 to $2,500 per month. This will benefit more lower-wage workers.

A $500 minimum income criterion will also be introduced – to encourage part-timers and casual workers to take up full-time positions.

Workfare will also be extended to younger workers aged 30 to 34, so they can start planning for their housing and retirement earlier.

The maximum amount of Workfare payouts will also increase:

  • [NEW] Those aged 30 to 34: $2,100

  • Those aged 35 to 44: $3,000

  • Those aged 45 to 59: $3,600

  • Those aged 60 and above: $4,200

  • The maximum payout tier will also be extended to persons with disabilities regardless of their age.

Read Also: Singapore Budget 2022: 10 Things Business Owners Need To Know

#5 More Taxes For The Wealthy

If any of these wealth taxes affect us, we should be quite happy – since they are targeted for the upper echelons of income earners and the wealthy.

Firstly, the personal income tax of the highest earners will go up. Currently, the personal income tax tops out at the $320,000 chargeable income mark – and they pay 22% on any income beyond that mark.

From Year of Assessment (YA) 2024, the top marginal tax rate will be raised.

Portion of Chargeable Income

Tax Rate

First $320,000

Next $180,000

$44,550

22%

First $500,000

Next $500,000

$84,150

23% (up from 22%)

First $1 million

In excess of $1 million

$199,150

24% (up from 22%)


Next, for luxury cars in Singapore, there will be an increase in the Additional Registration Fee (ARF). This will raise the ARF from 180% to 220% for cars with an Open Market Value (OMV) of more than $80,000.

Property tax will also be raised. For those who do not stay in their residential property (i.e. they are renting it out), the non-owner occupied property tax rate will increase from 10% to 20% today to 12% to 36%. For those who live in their own home, the owner-occupied property tax rate will also increase for homes with an AV of more than $30,000, at a lower rate, from 4% to 16% today to 6% to 32%.

Finally, the wealthier are also expected to spend more, and this contributes more to their GST revenue collection. They are also not going to be supported with as much rebates as those who need it more.

Read Also: Singapore Budget 2022: 5 Ways Taxes In Singapore Are Increasing

#6 Retirement Sums Will Increase 3.5% From 2023

To ensure Singaporeans are on track for their retirement expenses, the Basic Retirement Sum (BRS) will be increased by 3.5% from 2023. Along with the BRS, the Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) will also go up.

Year

Retirement Sums

2018

(Previously announced)

BRS: $85,500

FRS: $171,000

ERS: $256,500

2019

(Previously announced)

BRS: $88,000

FRS: $176,000

ERS: $264,000

2020

(Previously announced)020

BRS: $90,500

FRS: $181,000

ERS: $271,500

2021

(Previously announced)

BRS: $93,000

FRS: $186,000

ERS: $279,000

2022

(Previously announced)

BRS: $96,000

FRS: $192,000

ERS: $288,000

2023

BRS: $99,400

FRS: $198,800

ERS: $298,200

2024

BRS: $102,900

FRS: $205,800

ERS: $308,700

2025

BRS: $106,500

FRS: $213,000

ERS: $319,000

2026

BRS: $110,200

FRS: $220,400

ERS: $330,600

2027

BRS: $114,100

FRS: $228,200

ERS: $342,300

 

As we can see in the chart above, the retirement sums will go up by 3.5% in the next 5 years, from 2023. Previously, the retirement sums were only increasing at a rate closer to the 3% mark.

In the next 5 years, the increase in the retirement sum will be at a higher rate – at the 3.5% mark. This indicates that we need to save more for a basic level of income in our retirement.

Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55

The post 6 Things From Singapore Budget 2022 That Will Affect You Financially appeared first on DollarsAndSense.sg.