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CPF contributions >$7000

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brian_singapore
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CPF contributions >$7000

Postby brian_singapore » Mon, 22 Jan 2018 2:56 pm

Quick question, I topped up my CPF contribution by $7000. E-Cashier then gave me a message saying I was able to contribute more then $7000 but would not receive a tax credit for any contribution in excess of $7000.

Does this mean in theory I could make a contribution of $100,000 if I was fortunate to have this lying around and it would become part of my CPF SA earning CPF interest tax free?

I have spent time on the CPF pages and FAQs but find myself going in circles a bit.

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PNGMK
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Re: CPF contributions >$7000

Postby PNGMK » Mon, 22 Jan 2018 4:15 pm

There are three caps in play and frankly both the IRAS and CPF do a lousy job of laying it out. So here's my take - IANAL IANACPA

1. Total maximum contributions per year (aka CPF Annual Limit) which is the sum of EE and ER on your payslip PLUS cash top up total is $37,740 in YA17. CORRECT

2. Total tax relief of $7,000 for cash to SA is available for < 55 if you SA is less than FRS ($166k). You can still cash top up CPF to the Annual limit to MA and OA. In general terms you should only need to top up if you're not getting bonuses or AWS OR you are being paid less than $6,000 pm OR if you're older and your contribution rates have dropped. CORRECTED.

In short,sum up your total EE and ER contributions through the year (remember AWS and some bonuses are also included) and determine the difference between $37,740 and what you have contributed. Your SA balance determines if you have tax relief available up to $7k. I run this in a monthly S/S using my payslip data and at 52 with bonuses there is no need to top up to achieve a tax deduction AS I AM OVER FRS in my SA and have been for some years. CORRECTED.

3. Total Tax Relief cap of $80,000 in YA18 - you may get close what you add in everything esp SRS deduction if you're a foreigner. CORRECTED.

4. Also somehow the FRS sum comes into play. No tax deduction if your SA or RA above FRS. CORRECTED.

Personally I find the SRS tax deduction of $15,300 at your top marginal tax rate far more attractive than the CPF relief as there is no variation and it's easy to do on the last few days of the year (drop a cheque into your SRS account). Google SRS if you don't know what it is. It's a fantastic rate of return. CORRECTED.

One thing to keep in mind as you get close to 55 is that the personal tax relief jumps up but there is a drop (significantly so) in CPF contribution rates. Also though remember that post 55 you no longer have an OA but only a RA to contribute to. I am not certain yet of the advantage of topping up in cash post 55 (I'm 53) although with the high personal tax relief and lower CPF rates it may make some sense. TBD.

To answer your question about contributing $100,000 - CPF will refund the difference between the max contribution cap and what you put in, if you try. It's happened to me before. Be very careful as if you over contribute the money might go back to employer and not you! (long long story).
Last edited by PNGMK on Mon, 22 Jan 2018 9:14 pm, edited 1 time in total.
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brian_singapore
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Re: CPF contributions >$7000

Postby brian_singapore » Mon, 22 Jan 2018 4:43 pm

Thanks, this was very helpful.

I was planning on contributing to an SRS this year as well. I didn't realize the tax treatment was different to that of CPF.

Brian

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Re: CPF contributions >$7000

Postby GSM8 » Mon, 22 Jan 2018 8:23 pm

PNGMK wrote:Personally I find the SRS tax rebate of ~$1000 far more attractive than the CPF relief as there is no variation and it's easy to do on the last few days of the year (drop a cheque into your SRS account). Google SRS if you don't know what it is. It's a fantastic rate of return.

How is SRS tax rebate ~$1000? From what I recall, one can contribute $15,300/year (more if on EP). Contribution is fully tax deductible, subject to the $80,000 deduction limit, and interest/gains are tax free. After that, penalty free withdrawals are only after 62, and 50% subject to tax (be it lump sum or annuity). Agreed that its not presented too clearly on CPF etc websites

Of course all the above is worth squat if one holds a US passport. Speak of dog in the manger

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PNGMK
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Re: CPF contributions >$7000

Postby PNGMK » Mon, 22 Jan 2018 8:55 pm

GSM8 wrote:
PNGMK wrote:Personally I find the SRS tax rebate of ~$1000 far more attractive than the CPF relief as there is no variation and it's easy to do on the last few days of the year (drop a cheque into your SRS account). Google SRS if you don't know what it is. It's a fantastic rate of return.

How is SRS tax rebate ~$1000? From what I recall, one can contribute $15,300/year (more if on EP). Contribution is fully tax deductible, subject to the $80,000 deduction limit, and interest/gains are tax free. After that, penalty free withdrawals are only after 62, and 50% subject to tax (be it lump sum or annuity). Agreed that its not presented too clearly on CPF etc websites

Of course all the above is worth squat if one holds a US passport. Speak of dog in the manger


You're absolutely right about SRS and I apologize. I don't know why I had that number in my head. I dug up my last NOA to check and I was given a $15,300 deduction off my taxes which at the top marginal rate I was taxed at (19.5%) = $2,983.50 in savings. It's considerably more than I thought and is an effective 19.5% straight line return (but of course less on the total I have which is ~$150,000 - there it's worth 2%. Perhaps I had a figure in mind from 15 years ago when I started with SRS and calculated the tax savings.) Note for a foreigner tax resident the amount claimable is more than doubled ($35,700)and if you're in a high band like 20% that's whopping $7,140 tax deduction. In fact it may pull you down a tax bracket....
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PNGMK
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Re: CPF contributions >$7000

Postby PNGMK » Mon, 22 Jan 2018 9:06 pm

brian_singapore wrote:Thanks, this was very helpful.

I was planning on contributing to an SRS this year as well. I didn't realize the tax treatment was different to that of CPF.

Brian


https://www.drwealth.com/srs-singapore/

Good info.

Also I think I've got some wrong info above - in fact quote wrong although I am right about the max CPF contribution cap.

See https://www.iras.gov.sg/irashome/Indivi ... up-Relief/

1. Max cash top up deduction of $7000 per year to CPF SA.
2. Subject to limits on the SA based on Full Retirement Sum ($166,000 less your SA account is all that's permitted to be claimed in absolute total). That's the reason I cannot top up. I just didn't remember (my SA >> $166,000 for quite a few years now).

You CAN top up your CPF MORE than the $7000 (to MA or OA) but it's not tax deductible AND there is still the overall cont limit.

In summary I stand by my contention that SRS is a simpler and more rewarding scheme than cash top ups for CPF.
IANAL. IANACPA. IANA Teacher.
Arrested? Lawyer Up
International School job? School website or www.ISS.edu
School advice? Avoid for profit schools
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