How Budget 2016 Affects Your Household Budget
“Easing the cost of living of the rakyat” is one of the five pillars of Budget 2016, tabled by Prime Minister Datuk Seri Najib Razak in October 2015. The full speech can be found here. It’s a lengthy text, so for the sake of convenience, the parts of the Budget that affect your household budget are highlighted below:
1. New national minimum wage
A new national minimum wage will come into effect on 1 July 2016. It will be increased from RM900 to RM1000 per month for Peninsular Malaysia and from RM800 to RM920 for Sabah, Sarawak, and the Federal Territory of Labuan. This new minimum is applicable to all except for domestic services.
The minimum starting salary of civil servants will be RM1,200.
2. Civil servants
From 1 July 2016, the salaries of civil servants will be adjusted equivalent to one annual increment according to grade. The minimum pension rate will be set at RM950 a month for pensioners who have served for at least 25 years. For contracted service officers, those who have served for at least 15 years will be given the chance to be permanently employed.
The BR1M hand-outs will be increased by RM50 per category, including for individuals earning less than RM2,000 a month (RM400 BR1M compared to RM350 in 2015), and a new category for households earning less than RM1,000 a month will be introduced. The government will also continue the Bereavement Scheme worth RM1,000.
|Monthly Household Income||Hand-outs|
|<RM1,000||RM1,050 (previously RM1,000)|
|<RM3,000||RM1,000 (previously RM950)|
|RM3,000-RM4,000||RM800 (previously RM750)|
More food items are being exempted from GST next year. This includes soybean- and organic-based milk for infants and children, dhal, lotus roots, water chestnuts, mustard seeds, jaggery powder, and dried mee kolok. Among these, the exemption of GST for milk will benefit young parents greatly.
Besides announcements to build and maintain clinics and hospitals and increase the number of mobile clinics that operate in rural areas, the government will also exempt from GST all controlled medicines in Poisons List Groups A, B, C, and D; and 95 brands of over-the-counter medicines for 30 types of illnesses including cancer, heart disease and diabetes.
If you earn more than RM600,001 a year, be prepared to pay more in income taxes. Where you used to pay 25% in taxes before, the new rates will be as follows:
|Income Tax Bracket||Current Tax Rate||New Tax Rate|
Income tax relief
You also stand to gain tax relief for parental care (RM1,500 per parent, sharable among siblings), putting a child through tertiary education (RM8,000 from RM6,000 for able-bodied children and RM14,000 for handicapped children), and for each child you have (RM2,000 per child). An individual tax-payer can also apply for a maximum tax relief worth RM7,000 for pursuing tertiary education. If your spouse has no income, or if you are an ex-husband paying alimony to your divorced wife, you can gain tax relief worth RM4,000 versus RM3,000 currently.
In addition to the annual BR1M book vouchers worth RM250, households that earn a cumulative income of less than RM3,000 a month will continue to get RM100 in schooling assistance.
Mobile phone prepaid users will receive rebates equivalent to the amount of GST paid for their top-ups. However, this will only be effective throughout 2016.
Economy class domestic flights on Rural Air Service (RAS) routes will be GST-exempt. RAS routes are for non-economical destinations in interior Sabah and Sarawak and Labuan, and it includes destinations such as Bario, Lawas, Limbang, Lahad Datu, and Tawau. Normal flights will still be charged GST.
Greater tax reliefs will allow Malaysians to save money, as well as the GST exemption for food items and prepaid mobile services. Hopefully, it will be enough to ease us into a better year than 2015.