Update on tax on Supplementary Retirement Scheme withdrawal

Cur­rently, an SRS mem­ber can with­draw up to $40,000 per year from his SRS account tax-free on or after reach­ing the pre­scribed retire­ment age, assum­ing that he has no other tax­able income. Over the max­imum with­drawal period of 10 years, he can with­draw up to $400,000 tax-free.
How­ever, if an SRS mem­ber passes away before com­plet­ing his SRS with­draw­als or made a full with­drawal on the grounds of ter­minal ill­ness, he would not be able to enjoy the full bene­fit from spread­ing out his SRS with­draw­als over a 10-year period. Hence, from year of assess­ment 2016, a tax exemp­tion of up to $400,000 would be gran­ted for SRS funds deemed with­drawn upon an SRS member’s demise or a with­drawn in full on the grounds of ter­minal ill­ness.

Next, from July 2015, SRS mem­bers will be able to apply to their SRS oper­at­ors to with­draw an SRS invest­ment by trans­fer­ring the invest­ment out of their SRS accounts (e.g. into their per­sonal Cent­ral Depos­it­ory (CDP) account), without hav­ing to liquid­ate their SRS invest­ments. This is only applic­able for the fol­low­ing types of with­draw­als, which qual­ify for the 50% tax concession:

  1. with­drawal on or after the stat­utory retire­ment age pre­vail­ing at the time of an SRS member’s first con­tri­bu­tion (cur­rently age 62);
  2. with­drawal on med­ical grounds;
  3. with­drawal in full by a for­eigner who has main­tained his SRS account for at least 10 years from the date of his first con­tri­bu­tion; and
  4. actual with­drawal made by an SRS mem­ber or his legal per­sonal rep­res­ent­at­ive (if he is deceased) from his SRS account, after the SRS invest­ment that is to be with­drawn had earlier been deemed with­drawn upon death or after the expiry of the 10-year with­drawal period.

All other with­draw­als from an SRS account, includ­ing pre­ma­ture with­draw­als, must be made in cash.

Reduce Income Tax with Supplementary Retirement Scheme (SRS)

Sup­ple­ment­ary Retire­ment Scheme (SRS) is a vol­un­tary sav­ing scheme intro­duced by the gov­ern­ment to encour­age Singa­por­eans to save more for their old age. Singa­por­eans and for­eign work­ers can open an SRS account at any branches of the 3 SRS Oper­at­ors — DBS, OCBC and UOB. Par­ti­cipants can then con­trib­ute up to $12,750 (for Singa­por­ean and Per­man­ent Res­id­ents, or $29,750 for for­eign work­ers) to SRS at their own dis­cre­tion yearly.

 

Bene­fits

One imme­di­ate bene­fit for par­ti­cip­at­ing in SRS is that you can claim tax relief for con­tri­bu­tions made to SRS. Each dol­lar of SRS con­tri­bu­tion will reduce your income chargeable to tax by a dol­lar. This works out to be a total sav­ings of up to $2,550, depend­ing on your Income Tax Bracket and the SRS con­tri­bu­tion. You will need to con­trib­ute to the SRS account before 31 Dec of each year in order to enjoy the tax relief in the next year of assess­ment of income tax.

Before end of this year, you can reduce your income tax by con­trib­ut­ing to your Sup­ple­ment­ary Retire­ment Scheme (SRS). And read on NTUC income products that will help to grow your SRS money that beat the silent thief, i.e. inflation.

Let’s look at the two examples below. Con­tinue read­ing