April 22, 2009

Easy guide to tax filing - Part 1

Q: As a sales and marketing executive with a financial institution, I am paid a basic salary and sales commission and am not entitled to any claims (petrol, toll, parking and car maintenance). I use my own car to do my job. My average monthly expenses for sales and marketing activities are about RM500.

I understand that with the new provisions under Budget 2009, the employee is entitled to tax exemption for certain benefits. Since my company does not provide such benefits, can I claim marketing and travelling expenses under “Perbelanjaan Keraian”?

A: The actual amount you incurred can only be deducted provided that you received either entertainment or travelling allowances from your company. In your case, the amount you incurred is not deductible.

I understand that meal allowances can only be claimed for tax relief for outstation travel or overtime. I am being transferred to a branch in Klang next month from my present workplace in Puchong, and my employer has agreed to give me an additional monthly amount of RM800 as meal allowance.

Can I deduct my meal allowances since I reside in Subang Jaya and don’t do overtime? My working hours are 9am-5pm and I work six days a week.

Your meal allowance for employment in the Klang branch will not be eligible for deduction as it is not in respect of working overtime or travelling outstation.

What are the tax exempt employee benefits in relation to employees who have been given a fully-expensed company car and a company petrol card? I know that I will be assessed on the Scale Car and Fuel benefits for the use of the company car. For YA2008, am I entitled to the relief of RM2,400 for the tax exempt petrol card?

If so, can this RM2,400 be deducted from the Scale Fuel charge in YA2008 so that the Scale Fuel benefit assessed in the tax year will be lowered by RM2,400?

If (1) above is allowed and my actual petrol card expenses for the year exceed RM2,400, can the balance of actual petrol bills spent under the petrol card be deducted from the Scale Fuel benefit up to the maximum of exhausting the amount of the Scale Fuel benefit?

The benefits in kind with regards to the car benefit and fuel benefit are to be taxed. These cannot be deducted as additional tax exempt benefits.

Monthly parking claims and fixed mobile-phone allowances are submitted to my company at the end of the month and these will be reimbursed into our salary in the following month. These claims are subject to EPF contribution. Therefore, are they tax-exempt for YA2008 and do they need to be disclosed under the tax-exempt benefits in the EA form?

Both parking and phone allowances up to the actual amounts incurred which are borne by the employer are tax exempt with effect from YA2008. The amount is to be disclosed as tax exempt benefits in the EA Form.

Can interest on housing loans and car loans be deducted from gross salary on the EA form? Are medical expenses such as maternity expenses deductible?

Interest on housing and car loans are deductible only if paid by the employer on a total loan amount of up to RM300,000. Similarly, medical expenses are only deductible if the amount incurred has been paid by the employer and this benefit is extended to maternity and traditional medical expenses. However, should these expenses be paid personally by the employee, they are not tax deductible.

My organisation is a resident company and our expatriate Japanese director and technical manager has two types of income – salary from Malaysia and salary from Japan. Please advise whether we have to declare our Japanese director’s income in total (i.e. Malaysia and Japan) or just Malaysia-derived income to the Malaysian government?

All employment income derived by the Japanese expatriate for exercising employment in Malaysia is subject to income tax, including the amount paid in Japan, if it is related to the exercising of employment in Malaysia.

Is the tax benefit on childcare allowance up to RM2,400 a year to be deducted directly from the EA form? Is this applicable if there is no such benefit from the company I work for?

The childcare allowance is only tax exempted if you receive such an allowance from your employer; otherwise the exemption will not be applicable to you.

In the event you do receive the childcare allowance, the amount (the lower of the actual amount received or RM2,400) is to be excluded from the employment income and disclosed in section C1 of the Form BE.

I bought a comprehensive insurance policy (life + medical + investment) and the insurer is unable to split the premium payment into life insurance and medical insurance. Can I treat this totally as a medical premium as I have already disclosed RM6,000 for my life insurance premium and EPF deduction?

In the event that the amount cannot be segregated, the amount is to be disclosed either as life or medical insurance premiums based on the description stated in the insurance premium receipt.

Source: TheStar

How to accumulate enough money for retirement

Wealth for retirement, How to earn 30-year investment returns with different savings amounts and rates

ON Jan 28, we have written an article on We all need to become millionaires. That article explained that we need to have cash reserves of about RM1mil to be able to maintain our current lifestyle 20 years after retirement.

Some readers responded and would like to know more on how to accumulate enough money for their retirement.

In this article, we will look into 30-year investment returns with different savings amounts and rate of returns. Our computation is based on the assumption that we start investing at the age of 25 and intend to retire at 55.

·Based on how much rate of returns you can achieve

The table shows that if we save RM100 per month and invest the money into fixed deposits (FD), assuming the FD can provide about 3% return over the next 30 years, our investment portfolio will reach RM58,274 when we reach 55.

However, if we can generate 5%, 7% and 10% returns, our investment portfolio will achieve RM83,226, RM121,997 and RM226,049 respectively.

The EPF may be able to provide us about 5% whereas unit trust investments may be able to give us 7% to 10% returns over a very long-term period.

Assuming that we treat the 3% FD return as our risk-free rate, any extra returns above this rate will be the risk premium for the additional risk that we are prepared to face.

Therefore, we need to understand our risk tolerance level before considering any type of risky investment.

We should ask ourselves whether we are willing to accept the uncertainty of return that is inherent in those investments.

Besides, we need to understand whether we can afford to have our savings tied up for a long period before we can achieve our investment targets.

·Based on how much you save and not how much you earn

We agree that when you earn more money, you should have more money for your investments. Unfortunately, some investors are unable to save even though they earn high salaries.

From the table, we can see that if we are able to save RM500 per month in FD, assuming a 3% return per annum, our investment portfolio will reach RM291,368 when we retire at age 55, five times higher than the savings of RM100 per month.

Hence, if we can cut down on our expenses and live below our means, we should have more money to save.

We should always ask ourselves whether we want to spend money on unnecessary luxury items to keep up with the Jones or be more frugal and spend less to achieve financial freedom earlier.

The question on how to generate high returns is frequently asked by readers. Unfortunately, there is no straight-forward answer to this.

We can equip ourselves with strong financial and investing knowledge which helps us in making better investment decision that will eventually translate into better returns.

To do so, we need to be interested in the economic and business activities around us.

For those who are beginning to learn about investing, you can go to any bookstore to look for investment books that you can comprehend to build up the foundation.

Remember that there is no point in buying books written by top investment gurus in the world if you cannot understand what it is trying to tell.

Once you have built up your knowledge, you should be able to digest the financial information and do your own research in investment.

Source: TheStar

April 20, 2009

PNB Offers 3.33 Bil ASM Units, 2 Bil ASW 2020 Units

Permodalan Nasional Bhd (PNB), the country's biggest fund manager managing RM76 billion worth of funds, will offer 3.33 billion new units of Amanah Saham Malaysia (ASM) and two billion Amanah Saham Wawasan 2020 (ASW 2020) units, Prime Minister Datuk Seri Najib Tun Razak announced on Monday.

He said the units would be sold from tomorrow at all the 1,500 agents and Amanah Saham Nasional Bhd offices country-wide while the ASW 2020 units can bought from April 27.

Each investor can buy a maximum of 20,000 units in the two schemes.

The announcement on the new unit trusts offer, which would enable more Malaysians to participate in the capital market, was made by the prime minister when launching the 2009 Malaysian Unit Trust Week here.

The unit trust week, an annual event, is to boost awareness and understanding on investment and importance of planning one's finances.

Najib said the unit trust week hosted consistently every year over the past 10 years had yielded positive results in educating the people on the importance of savings and investment.

"If during the Asian financial crisis in 1997-98 saw investors withdrawing close to RM1 billion from unit trust schemes run by PNB like ASB, the situation is much better now," said Najib, who is also Finance Minister.

The prime minister said last year PNB enjoyed more than RM10 billion in net inflow into funds it was managing.

"I'm very happy PNB has succeeded in pooling more than RM87 billion from more than 9.3 million investors," he said.

Najib said the net inflow of PNB unit trusts was RM5 billion so far this year.

He said the dividend distributed to investors has exceeded RM65 billion, thus contributing to improve the socio-economic well-being of the people.

"This means PNB's unit trust funds have educated the people to be more efficient and prudent in managing their finances," he said.

Najib said the introduction of ASN and other unit trust schemes through PNB had changed the people's paradigm on investing in unit trusts to an unexpected level.

"Before ASN was introduced, Malaysians, especially Bumiputeras, were very alien to the investment world," he said

The prime minister said the unit trust industry became synonym with the people through PNB's continuous aggressive efforts until now besides efficient implementation of investment educational programmes.

"In fact, it is not too much if I say the PNB unit trusts have succeeded in developing a own brand in the country's unit trust industry by galvanising solid support from Bumiputeras and non-Bumiputeras," he added.

Source: Bernama

CIMB launches China fund, targets RM150m

CIMB-Principal Asset Management Sdn Bhd is targeting RM150million investments from customers for its CIMB-Principal China Recovery Structured Fund on improved economic climate in the third-largest economy in the world, said its chief executive J. Campbell Tupling.
"The stimulus plan by Chinese government has seen change in sentiments. Positive developments are visible in major sectors -- infrastructure, housing, innovation, health and education-- that would enable China to chart high growth potential," Tupling said at the launch of the fund on April 20.

The five-year close-ended fund has an approved fund size of 300 million units with an initial offer price of 50 sen per unit. Minimum investment for the fund is RM10,000. The fund, based on the CIMB-Isovol China Index, could see potential gains of 7%.

Tupling also said the fund would appeal to low risk investors as the fund offered capital protection if held to maturity.

It would also reduce investor's dilemma in terms of entry to the Chinese market as the fund would automatically select and lock-in investments at lowest entry level to enhance potential gains after a six-month observation.

The firm's chief investment officer Raymond Tang estimates China's GDP growth at 7.6% this year on stimulus spending by the Chinese government.

"Investors can expect better outlook for China this year as consensus view is the nation will be one of first economies to recover," Tupling said.

Source: TheEdge Malaysia

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