Malaysia Budget 2014

Budget 2014 for Malaysia was presented officially on last Friday. Two major announcements of Budget 2014 were the 6% Goods and Services Tax (GST) rate and abolition of the 34 sen sugar subsidy. Let's go through all the highlights of Budget 2014 and its impact to specific group of people.

For everyone,

• 6% GST will be implemented on 1st April 2015 with the GST rate among the lowest in Asean countries. Sale, purchase and rental of residential properties as well as selected financial services were exempted from GST. Similarly, GST would be excluded in transportation services such as bus, train, LRT, taxi, ferry, boat, highway toll and education & health services.
• Abolition of sugar subsidy effective from 26th October 2013 due to the high diabetic rate among Malaysians under the age of 30.

For the lower income group,

• Under BR1M 3.0, households with a monthly income of below RM 3000 can get RM 650 (increment of RM 150 from BR1M 2.0). BR1M assistance of RM 450 is also extended to households with monthly income of between RM 3000 and RM 4000. 
• For single individuals aged 21 and above and with a monthly income not exceeding RM 2000, BR1M is increased from RM 250 to RM 300.
• One-off cash assistance of RM 300 to households who are BR1M recipients would be given when GST is implemented.

For affordable housing,

• For gains on properties disposed within the holding period of up to three years, the RPGT rate is increased to 30%, whereas for disposals within the holding period of up to four and five years, the rates are increased to 20% and 15%, respectively. For disposals made in the sixth and subsequent years, no RPGT is imposed on citizens, whereas companies are taxed at 5%.
• For non-citizens, RPGT would be imposed at 30% on the gains from properties disposed within the holding period of up to five years, and disposals in the sixth and subsequent years, RPGT is imposed at 5%. Minimum price of property that could be purchased by foreigners will be increased from RM 500000 to RM 1million.
• Government also prohibits developers from implementing projects with Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating interest rates on loans in house prices during the construction period. Financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme.
• To further increase access to home ownership at affordable prices, an estimated 223000 units of new houses will be built by the government and the private sector in Year 2014.
• Government will allocate RM 578 million to the National Housing Department (JPN) for low cost flats consisting of 16473 housing units. Government will provide 80000 housing units with an allocation of RM 1 billion under affordable housing scheme. The sales price of the houses will be 20% lower than market prices.
• Introduce the Private Affordable Ownership Housing Scheme (MyHome) to encourage the private sector to build more low and medium-cost houses. The scheme provides a subsidy of RM 30000 to the private developers for each unit built. Preference will be given to developers who build low and medium-cost houses in areas with high demand and limited to 10000 units in 2014. The scheme is for housing projects approved effective from 1st January 2014 with an allocation of RM 300 million.

For government servants,

• Half-month bonus for 2013 with a minimum payment of RM 500 will be paid in early January 2014.
• Pensioners will receive a special financial assistance of RM 250 to assist them meet the rising cost of living. 

For employees,

• Individual income tax rates would be reduced by 1% to 3% for all tax payers to increase disposable income.
• Special tax relief of RM 2000 will be given to taxpayers with a monthly income up to RM 8000 received in 2013.

For students,

• 1Malaysia Book Voucher Programme valued at RM250 will continue to be provided to each student. The initiative is expected to benefit 1.3 million students involving an allocation of RM325mil. 
• RM 100 schooling assistance will still be given to all primary and secondary students.