It’s coming to the end of the year and a good time for reflection as well. Are you thinking of ways to better your finances such as lowering your personal income tax, and making sure that your assets are optimised?

If you are, you may not want to wait till the next tax season which is next March – April.

Ways to reduce taxes

Not only do the ways to lower taxes good for you and your pocket; they also benefit the people you care for:

  1. Saving up for retirement with CPF and the Supplementary Retirement Scheme (SRS)
  2. Caring for your parents
  3. Having children
  4. Upgrading your skills
  5. Claiming expenses in the course of earning your income, e.g. as a self-employed, having rental income
  6. Donating to your favourite charity

This write-up will focus on making full utility of SRS. And in order to enjoy the tax benefits next year, contributions to your SRS account must be completed by 31st December to be eligible for tax reliefs next year, so don’t wait!

What is SRS and how does it benefit me?

Absolute Income Base* Yearly Maximum SRS Contribution
Singapore Citizens / SPRs (17 months x $6,000) = $102,000 15% of Absolute Income Base (15% x $102,000) = $15,300
Foreigners (17 months x $6,000) = $102,000 35% of Absolute Income base (35% x $102,000) = $35,700

*The Absolute Income Base is calculated on 17 months of the CPF monthly salary ceiling. Source: IRAS

“The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Contributions to SRS are eligible for tax relief. Investment returns are tax-free before withdrawal and only 50% of the withdrawals from SRS are taxable at retirement1.”

The yearly maximum SRS contribution is currently $15,300 and $35,700 for Singaporeans/PRs and Foreigners respectively.

  1. Immediate Savings

Once you have contributed to SRS, your chargeable income will be reduced by the amount you have contributed to SRS. For example, with a chargeable income of $125,000 reduced to $109,700, you would save almost $2,000 on taxes. Tax savings will be even higher if the taxable income is higher than the illustration.

Chargeable Income Marginal Tax Rate Income Tax
No SRS Contribution $125,000 15% $8,700
SRS Contribution of $15,300 $109,700 11.5% $6,765.50
Tax Savings $1,934.50
  1. SRS monies can be invested for better returns

You can register and open an SRS account with any of the local banks, and as the rate is fixed at 0.05% per annum, it only makes sense to invest the funds before it’s eroded by inflation which stands at 2.5%2. In fact, the gap over 30 years is a whooping $655,360 just by investing the maximum $15,300 every year, with funds growing at an assumed 5% p.a. garnering $1,133,466 eventually. This would come in handy for retirement!

For illustration only. Assumed performances are not indicative of future performances.

Also, as we believe that SRS is meant for tax management and funds in it can only be withdrawn penalty-free after the statutory retirement age, currently at 62 years old, this generally gives SRS investments a longer time horizon.

Thus, Unicorn’s recommended SRS portfolio has a higher exposure to equities at 45% since there is more time to ride out the volatility. Currently, our Cash and CPF OA portfolios are allocated with 35% to equities.

Should I open an SRS account and invest right away?

SRS certainly has its benefits, however, as SRS funds are subjected to a 5% penalty on top of taxes when withdrawn early, it is imperative to ascertain that you’ve sufficient contingency funds as well a proper financial blueprint in place for you to reach your financial goals and objectives, before committing to SRS.

Also, there is a maximum withdrawal period of 10 years as well as taxes to consider. Withdrawing from SRS at the statutory retirement age would attract a tax rate of 50% and assuming that there is no other taxable income, you can withdraw up to $40,000 per year tax-free, i.e. $400,000 over 10 years.

With the above in mind, do speak to your Unicorn Consultant to work out the most fitting strategy for you, so that you may enjoy both tax savings AND investment returns!

Note: We had increased the frequency of our communication with you during turbulent times. We will continue to communicate monthly with you during usual times.


1.Inland Revenue Authority of Singapore
2.The Global, inflation averaged over 1961-2019

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