Restoring your wealth


Rajen Devadason, a licenced financial planner with Manulife Investment Management (M) Bhd said the encouragement of personal responsibility in preparing for retirement is by granting enhanced tax benefits to individuals for PRS (Private Retirement Scheme) investments, and introducing long overdue tax benefits for unit trust investments by individuals.

EVER wondered how the national budget will affect you and your wallet when it is tabled this Friday – will you be better off, worse or remain status quo?

Budget 2022 is essentially a part of the national economic plan. Whatever is tabled will affect you one way or another. If more taxes are imposed, you will have less money in your wallet. It is the opposite if taxes are reduced.

Of course those affected badly by the Covid-19 pandemic are hoping for another round of stimulus package to help them ride the tide.

This is despite the fact that the government has dished out billions of ringgit in aid packages since March last year. This has almost depleted its coffers and it needs to look at new ways to earn more money as a result.

Imposing windfall profit tax has been suggested by experts for sectors that benefited during the pandemic. This includes the glove makers, palm oil producers, and even the telecoms sector.

Raising taxes across the board at this point of time is not recommended.

However, raising income tax for individuals in the upper part of the income scale is more viable.

If possible, a reduction by one notch for the middle income earners would be good.

This is the lot that is squeezed between the low and higher income groups.

A report described them as “too poor to enjoy a comfortable life or too rich to be entitled to subsidies.’’

How can they accumulate wealth to escape the middle income trap?

What can also move the needle for this group according to experts, is a change in long term sustainable policies to see a shift in their wealth for them to live a comfortable life.

They need better access to affordable transportation, better healthcare facilities, higher wages, better loans facilities and free re-skilling and retraining provisions, the report said.

Savings through the Employees Provident Fund (EPF) is a vital component for retirement planning.

For now the individual voluntary contribution limit is RM60,000 a year. This should be increased to RM100,000 to help people save more for their golden years.

Rajen Devadason, a licenced financial planner with Manulife Investment Management (M) Bhd said the encouragement of personal responsibility in preparing for retirement is by granting enhanced tax benefits to individuals for PRS (Private Retirement Scheme) investments, and introducing long overdue tax benefits for unit trust investments by individuals.

He added a zero corporate tax rate for small businesses on the first RM50,000 in profits and a calibrated increase in corporate tax rates is aimed at allowing SMEs to retain more after-tax profits.

“That can then be used to hire more Malaysians. Invest in their upskilling through on-the-job training to counter the currently low level of critical thinking skills in many young local graduates caused by failures in the present national education system, and simultaneously improve business productivity through automation powered by the confluence of robotics and artificial intelligence,’’ he said.

There should also be incentives to raise the language proficiency of young Malaysians in English and Mandarin to help them thrive in the near future.

“Also, looking at demographic and affordable tertiary education trends, introductory courses in Spanish and German will allow the next two generations of Malaysians to make even greater inroads into the job and business markets of the mid-21st century,’’ he said.

Financial literacy is essential for the lower and middle income earners and therefore more avenues should be provided to assist them in financial and retirement planning.

Kimberly Law, a licenced financial planner with IPPFA Sdn Bhd said there are tax incentives for seeking medical treatments and education courses.

This should be extended for those seeking professional financial planning help/services from companies that are approved by the Securities Commission.

“There is also tax relief for purchase of sports equipment or subscription for publications.

“We also hope to see tax incentives for consultation fees with a licensed financial planner or purchase of their financial report prepared by a licensed financial planner. This will strongly help to increase awareness on the professional services available in Malaysia,’’ she said.

She also hopes to see the continuation of the additional tax relief on lifestyle on top of the existing relief.

“However, everyone needs to be careful. We do not want people to go out of the way to spend the money they don’t have in order to enjoy this tax relief,’’ she said.

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