CPF Top up questions

[Froggyman]

FRS increases less than 4% per year, interest rate is 4+%

Interest is excluded from calculation on topping up RA to new FRS yearly.

 

[BBCWatcher]

Given that FRS increases every year, I should be able to still do cash top-up to the new FRS mark and get tax relief right unless the interest you get for that year is counted in.

Good point, for RAs only. I corrected the post.

Of course you should weigh the value of the RA tax relief(s), if any, against the 4+% interest you could be earning with a higher-than-FRS RA balance (and the asset protection benefits with a higher RA balance).

 

[highsulphur]

Good point, for RAs only. I corrected the post.

Of course you should weigh the value of the RA tax relief(s), if any, against the 4+% interest you could be earning with a higher-than-FRS RA balance (and the asset protection benefits with a higher RA balance).

So far, if you had hit SA max, the interest usually will be more than the increase in SA ceiling

 

[BBCWatcher]

So far, if you had hit SA max, the interest usually will be more than the increase in SA ceiling

Yes, that’s for SA. The tax relief ruleset for RAs is slightly different.

 

[fr33d0m]

Interest is excluded from calculation on topping up RA to new FRS yearly.

I thought RA tax relief only for people who did not reach FRS in SA before RA is created.

once SA/RA reaches FRS, that's it for retirement top up tax relief, correct me if I am wrong.

can top up RA does not equal to tax relief.

 

[royalmix]

I thought RA tax relief only for people who did not reach FRS in SA before RA is created.

once SA/RA reaches FRS, that's it for retirement top up tax relief, correct me if I am wrong.

can top up RA does not equal to tax relief.

https://www.iras.gov.sg/taxes/indiv...ntral-provident-fund-(cpf)-cash-top-up-relief

Learn to read and interpret IRAS tax rules properly! He posted as a reply!

 

[reddevil0728]

I thought RA tax relief only for people who did not reach FRS in SA before RA is created.

once SA/RA reaches FRS, that's it for retirement top up tax relief, correct me if I am wrong.

can top up RA does not equal to tax relief.

https://www.cpf.gov.sg/member/faq/g...t-is-the-maximum-amt-of-top-ups-i-can-receive

 

[royalmix]

https://www.cpf.gov.sg/member/faq/g...t-is-the-maximum-amt-of-top-ups-i-can-receive

Dun anyhow post link! This has nothing to do with TAX RELIEF!

The correct IRAS Link already posted before you!

 

[fr33d0m]

Dun anyhow post link! This has nothing to do with TAX RELIEF!

The correct IRAS Link already posted before you!

Since you are such a rude person, I will just reply this one time to you.
Show me evidence rather than an ambiguous text.

With more than FRS in SA, after RA creation, lower than FRS, still allows for tax relief. That will be a huge loophole. LOL

 

[BBCWatcher]

I thought RA tax relief only for people who did not reach FRS in SA before RA is created.

Just because you have a Special Account funded to (or above) the Full Retirement Sum doesn't necessarily mean your Retirement Account will always be funded at or above the Full Retirement Sum. The CPF Investment Scheme (SA) is one way there could be divergence. Another way is that the FRS is applied differently to RAs for tax relief eligibility purposes. When the FRS is raised there may be a new tax relief opportunity with RA. Royalmix posted the link to the details.

once SA/RA reaches FRS, that's it for retirement top up tax relief, correct me if I am wrong.

That's not a correct statement for RA as you've written it. A Retirement Account can reach the FRS but then be eligible in the future for tax relief (when the FRS is raised).

 

[BBCWatcher]

Here's IRAS's explanation. Let's look carefully at their language in the section "Limit on cash top-up amount for computing tax relief." Here's what they say for Special Accounts (recipients below the age of 55):

Limit = current Full Retirement Sum - Special Account savings - amount withdrawn from SA for investments*

The "*" is a footnote about how CPF Investment Scheme (SA) dollars are counted, and it's not surprising.

And here's what they say for Retirement Accounts (which only members age 55+ can have):

Limit = current Full Retirement Sum - Retirement Account Savings**

The "**" is a footnote which reads: "RA savings refers to the cash set aside in RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn."

I bolded the important part. For RAs the interest earned is NOT counted toward the Full Retirement Sum for tax relief eligibility purposes. For SAs interest earned IS counted toward the Full Retirement Sum. That means that, even if your RA has reached the FRS, if (when) the FRS is raised your RA may offer some further room for tax relief.

But don't overinterpret IRAS's language. This language is solely about tax relief eligibility. There's separate language (that also includes the words "Full Retirement Sum") relating to how much you can withdraw from a Retirement Account in a lump sum, and in what circumstances. The CPF Board publishes that separate language.

 

[Froggyman]

I thought RA tax relief only for people who did not reach FRS in SA before RA is created.

once SA/RA reaches FRS, that's it for retirement top up tax relief, correct me if I am wrong.

can top up RA does not equal to tax relief.

Yup.. can top up RA does not equal to tax relief.
Believe by default.. your RA will be at FRS at age 55( provide your SA+RA exceed FRS).
So next following year, can top up the difference to the new FRS amount … this amount can have tax relief . Any more extra top up to the RA will not give your tax relief.
Anyway, can see the require top up to get the tax relief in your CPF account.
But then, who knows what changes will be made when you reach 55

 

[fr33d0m]

Yup.. can top up RA does not equal to tax relief.
Believe by default.. your RA will be at FRS at age 55( provide your SA+RA exceed FRS).
So next following year, can top up the difference to the new FRS amount … this amount can have tax relief . Any more extra top up to the RA will not give your tax relief.
Anyway, can see the require top up to get the tax relief in your CPF account.
But then, who knows what changes will be made when you reach 55

I will believe it when I see evidence that someone with more than FRS when RA creation, but can subsequently top up RA and get tax relief.

So far I only see guess based on ambiguous text from IRAS page.

 

[highsulphur]

hopefully i will be retired by 55 and do not need any tax relief if income is less than 20k!

 

[fr33d0m]

hopefully i will be retired by 55 and do not need any tax relief if income is less than 20k!

Tax relief not only for working income. It can help draw down more from SRS, too. Don’t underestimate its utility

 

[BBCWatcher]

I will believe it when I see evidence that someone with more than FRS when RA creation, but can subsequently top up RA and get tax relief.

By default the CPF Board will only fund your Retirement Account on your 55th birthday to the then current Full Retirement Sum. Your Special Account could have $1 million in it, but that doesn't matter for these purposes. The CPF Board stops its automatic 55th birthday sweep once your RA reaches the FRS in effect on your 55th birthday, or SA and OA dollars are exhausted, whichever comes first.

Then the FRS increases, typically every January 1.

So far I only see guess based on ambiguous text from IRAS page.

How is IRAS's text ambiguous? Which part is unclear to you?

 

[highsulphur]

So to sum it up, if I have more than FRS in my SA before 55, my RA will be created with the FRS amount transferred from my SA. Even if RA increases through interest earned, I can still top up RA the difference btw the previous year's FRS and the new FRS and get tax relief? Or did i get it wrong again.

 

[BBCWatcher]

So to sum it up, if I have more than FRS in my SA before 55, my RA will be created with the FRS amount transferred from my SA. Even if RA increases through interest earned, I can still top up RA the difference btw the previous year's FRS and the new FRS and get tax relief?

Yes, you would qualify for tax relief in the scenario you describe, assuming you're otherwise eligible (haven't reached the $8,000 limit, haven't reached the $80,000 total tax relief limit, still have taxable income, etc.)

 

[Froggyman]

So to sum it up, if I have more than FRS in my SA before 55, my RA will be created with the FRS amount transferred from my SA. Even if RA increases through interest earned, I can still top up RA the difference btw the previous year's FRS and the new FRS and get tax relief? Or did i get it wrong again.

Yup.. you are correct.
you can check it out yourself in your cpf account on the allowable cash top up for tax relief when you reached 55 provided no changes of rule then

 

[highsulphur]

Yes, you would qualify for tax relief in the scenario you describe, assuming you're otherwise eligible (haven't reached the $8,000 limit, haven't reached the $80,000 total tax relief limit, still have taxable income, etc.)

Yup.. you are correct.
you can check it out yourself in your cpf account on the allowable cash top up for tax relief when you reached 55 provided no changes of rule then

thanks. Let's see how things have changed (rules wise and personal circumstances) when I hit 55. No point thinking about it now (nor can I do anything to prepare for it) anyway