Tax planning

Now it’s time to discuss for the forth element in financial planning which is tax planning. Road tax, income tax and the proposed Goods and Services Tax (GST) are considered tax. No matter you are a kid, student, working adult, senior citizen, you just cannot run away from tax.

Why we have to pay tax? One of the reasons is tax is source of income for the government. According to our Second Finance Minister Husni Ahmad Hanadzlah, tax will reduce the fiscal deficit and will not burden the people and businesses. Of course, there are many other reasons such as the tax impose on the imported car is to encourage the nations to support local automotive industry.

If tax is imposed by the government and how can we do our tax planning? We cannot do anything unless we do it illegally. Well, this post is not going to teach you how to do it illegally but the intention is to let you know how you can do your tax planning.

Check out the yearly budget that has been tabled in the parliament. I will use Budget 2010 as an example for this post and I will show how you can actually do your tax planning base on the budget. Those sentence in bold are some of highlights of Budget 2010.

1. Government reduce the maximum individual income tax rate from 27% to 26%, personal relief increase from RM8,000 to RM9,000 in 2010. By knowing this news in advance, the tax payers can do their planning earlier. Maybe they can invest the extra money or even use the money for entertainment or self-improvement.
   
2. Imposing

   RM50 service tax on each principal credit card and charge card, including those issued free of charge and a service tax of RM25 a year on each supplementary card effective Jan 1, 2010. Imagine if you do not aware of this news and you are still thinking that the banks are issuing those credit cards for free, what will happen? You might be wasting your RM50 for nothing.

3. Individual

   taxpayers will be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012. Those tax payers who depend heavily on the internet will be saving some money for subscribing broadband. Again, from the money that they save, they can use for other purposes.

4. Personal

   tax relief raised to RM7,000 from RM6,000 for EPF contribution and life insurance premiums. Why government decides to raise the tax relief for life insurance premiums? This is because it is essential for the nations to do risk management. You can refer to the post on risk management that has been posted earlier.

From the few examples that have been discussed earlier, we can see that it is possible for us to the tax planning. No doubt you need to pay some efforts in order to do the tax planning by reading the newspapers or internet to get the latest news on the country. There is no free lunch in the world so you should start doing your tax planning =)