The move by the Government in this year’s Budget to cap personal income tax relief at $80,000 has got many working mums hot under the collar. Some mothers told The Straits Times that it is a bitter pill to swallow after having enjoyed generous tax savings in past years.
The change will take effect from the Year of Assessment (YA) 2018 and tax experts estimate that it could affect about 20,000 people, of which most are likely to be working mothers.
Tax experts say that it is those working mothers earning above $150,000 with at least two children who will end up paying more tax, particularly if their chargeable income jumps to a higher tax bracket because of the new cap.
SANDWICH GENERATION MUMS
Elizabeth Chan (not her real name), 54, who earns about $250,000 a year and has two children, worked out that her personal income tax will jump 50 per cent to about $15,588 from her current $10,000.
This translates to an additional $500 a month in payable tax. Her total reliefs amounted to about $114,000 last year, of which the lion’s share of about $83,000 came from the Working Mother Child Relief (WMCR).
Assuming her reliefs and income remain unchanged, an amount of about $34,000 will be added to her chargeable income when the new cap is imposed. It will push her chargeable income to the higher tax bracket, which attracts 17 per cent of tax, up from her current 15 per cent tax bracket.
With the cap, her overall effective tax would still be considered low at 6.2 per cent, up from the current 4.1 per cent (see infographic). Elizabeth says: “Why target us, working mothers, who have worked hard both in our careers and at raising our children? I belong to the sandwiched generation, taking care of ageing parents and our children. Every cent counts.”
STOP SUBSIDISING MUMS
Not everyone agrees with this, though. In a column titled “Why working mums should be happy to start paying tax”, ST opinion editor Chua Mui Hoong hailed the new cap.
She wrote: “In other words, the rest of us taxpayers are subsidising the tax bills of working mums who earn $150,000, to the tune of nearly $11,000 a year. And to think that when the rules change to tax them $2,650, they complain?
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