"Working poor" in Singapore can't make ends meet: NUS

Earlier last week, there was a news article on "working poor" in Singapore.

http://www.channelnewsasia.com/news/singapore/working-poor-in-singapore/824408.html

The article say that a new study has shown that the working poor in Singapore are not getting enough pay to make ends meet. The term "working poor" puzzled me and I read on. According to the article, "working poor" is defined as someone whose income per household member is less than half of the national median per capita household income of Singapore, which now stands at S$1,920.

Based on this definition, someone whose income per household member is less than $960 per member is considered as "working poor". Extrapolating this further, if you have the following household income for the corresponding number of household members, you are considered to be "working poor".

no. of household members	income
1	$960
2	$1920
3	$2880
4	$3840
5	$4800
6	$5760
and so on....

Interestingly, a similar definition is used by Hong Kong for "poverty".

http://www.channelnewsasia.com/news/asiapacific/hong-kong-implements/829688.html

An extract of the article: Hong Kong on Saturday announced its first benchmark to measure poverty and found almost 20 percent of residents live in such conditions, a move hailed as a step towards tackling worsening inequality. The poverty line, marked at half of the median household income, showed 1.31 million people in the city were living in poverty, a rate of 19.6 percent, based on official data from 2012.

The study in the 1st article also stated that "more than 300,000 Singaporeans and Permanent Residents who earn less than S$1,500 a month, excluding employer CPF contributions, despite working full-time."

If these household have 2 or more members, they would have been considered as "working poor".

With rising cost of living, it makes us wonder how the poorer residents struggle to make ends meet in Singapore. 

I will end off this post with a few questions we we can ask ourselves:

1) Is the workfare income supplement (WIS) scheme sufficient? Are workers really being trained to increase productivity? 

2) Should we have a minimum wage scheme?

3) Are you willing to pay more taxes so that the government can raise social spending to help the disadvantaged?

Income group breakdown for year of assessment 2012

The Annual Report 2012/2013 for IRAS was released last week. Like the past few years, I lookout for the breakdown of the various income groups.

Source:
http://www.iras.gov.sg/irasHome/page.aspx?id=15206

The breakdown is as follows:

 

Based on the data above, we can see that:

1) Most tax payers fall into the range of the 30k-40k annual income band. The tax residents pay earn an average annual income of 34.8k and pay $165 in taxes

2) 4220 tax residents fall into the range of the highest band (more than 1M in assessable income). In the previous year, there was only 3870 tax residents in this band. For YA2012, they earn an average annual income of 1.9M and pay $354,213 in taxes.

Based on an analysis done by salary.sg:

http://www.salary.sg/2013/compare-your-annual-income-2013/

A $100k per-annum income will now place you at the 78.2th percentile, compared to 79.3th in the previous version of this tool (which uses last year’s IRAS data). This is a drop of almost 1 percentile.

Last year’s median income was $52,300. This year, it is $53,000.

If you make more than $91,500, you are in the top quartile (i.e. top 25%) of all resident taxpayers.

To be among the top 10% earners, you need an annual income of $171,000 or more.

To be at the 95th percentile (i.e. top 5%), you need to make at least $265,000 a year.

Other notes:

If you are interested to know how high or low our income is as compared to other tax payers, you can use the salary.sg calculator (link above) to check which percentile you belong to. 

Do note the following:

1) The statistics are based on IRAS year of assessment 2012 data. The income and taxes information are based on your 2011 income.

 

2) The statistics above do not take into account of individuals earning less than 20k per year as the first 20k of income is not taxable.

Related Posts:

Income group breakdown for year of assessment 2011

Income group breakdown for year of assessment 2010

Time to pay your income taxes again

It is time to pay our income taxes again. Some newer taxpayers may not know how Singapore's income tax works. Singapore's income tax rate is based on a progressive system. The first few "bands" of your income pay lesser taxes, the higher "bands" pay more taxes.

The tax rates for "tax residents" are as follows:

How to read this table
Your income is divided into bands as listed above. Note that "chargeable income" is after deducting all reliefs and CPF deductions. I will provide a few examples to estimate your taxes

Example 1: your annual chargeable income is 25k. The first 20k is taxed at 0%. Yes, you do not need to pay taxes for this first 20k. The next 5k falls into the band of the "next 10k" which is at a 2% tax rate. The income tax for this 5k will be 5000 * 2 / 100 = $100.

Example 2: Your annual chargeable income is 50k. Notice that your chargeable income spans across different bands with the following tax rates: 0%, 2 %, 3.5%, 7%.
Instead of working out the individual bands, you can look at the "First 40k" which has already computed the tax for the first 40k of assessable income. This amount works out to be $550 [10000 * 2 / 100 + 10000 * 3.5/100 ]. You then calculate the final band for the 10k which is 10000*7/100 = $700. Adding the two components, you have $550 + $700 = $1250.


One time tax relief
Earlier this year, there was a Budget 2013 announcement for income taxes.

All resident individual taxpayers will be given a personal income tax rebate for the tax payable for Year of Assessment (YA) 2013. The amount of rebate granted depends on the age of the resident individual as at 31 Dec 2012, subject to a cap of $1,500:
a) 30% for resident individuals aged below 60; and
b) 50% for resident individuals aged 60 and above.

Using example 2 above, the tax payer's taxes was calculated to be $1250. With the 30% rebate, he will only need to pay $875. Note that this relief only applies to YA2013

Income group breakdown for year of assessment 2011

The financial report for IRAS was released some time last week. One of the more interesting statistics to me was the breakdown of the various income groups..

Source: http://www.iras.gov.sg/irasHome/page.aspx?id=13986

A few things to note on the statistics above.
1) It seems that residents from Singapore are earning much more than we think. For example, there are more than 100k of tax residents earning between the $100k to $150k bracket. Each of them have an average assessable income of $121k. They pay an average of $5371 in taxes.

2) The highest band of more than a million in assessable income consists of 3870 individuals. Each of them have an average assessable income of  $1.925M. They pay an average of $356k in taxes.

3) Most tax payers actually fall under the $30k to $40k bracket. These tax payers have an average of $34847 of assessable income. They pay an average of $214 in taxes.


Other thoughts
So which band are you currently in? How far are you in moving on to the next band? How many tax payers are ahead of you in terms of income? We can ask ourselves so many questions when looking at the statistics above.

Another thing to note is that the richer folks probably earn more as they are able to invest more. At the very least, capital gains and dividends are not taxable in Singapore. Such "passive income" will not be reflected in the table above. The cost of living has grown so high that we can hardly just rely on our active source of income. We need to relook at our own portfolios and assess how we can make our money work harder.

Taxable income by income group 2010

The e-filing for individual income taxes has ended some time back. Once IRAS processes the submission, we should be receiving the notices for the payment. In the mean while, one can use the calculator on the IRAS website to estimate the taxes they need to pay:

http://www.iras.gov.sg/irasHome/page04.aspx?id=8278

Some people may also be interested on where they stand in terms of income compared to other tax payers. The breakdown for the assessable income for 2010 is as follows: 

source: http://www.iras.gov.sg/irasHome/page.aspx?id=12504

There is also a calculator on http://www.salary.sg/2012/compare-your-annual-income-latest/

where you can enter your assessable income to see where you stand against other tax payers. Do note that the calculator do not include annual incomes that are lesser than 20k as they are not taxable.

Other thoughts:

It is interesting to see how many taxpayers there are in the different income levels. We can also see how 12.5k individuals can earn more than 500,000 in a year. Do note that this is from employment income alone! These people definitely have passive income coming in from investments. The capital gains and dividends do not attract taxes nor CPF contributions. No wonder the rich always get richer!

From the table above, we can also see how the high income earners pay much more taxes than the lower income earners. This is due to the progressive income tax rate system in Singapore. For every dollar earned above the 320,000 mark, one will need to pay $0.20 in taxes (20%). Compared to first taxable band od 20k to 30k, the tax rate is only 2%. This tax system further affirms my conviction to eventually achieve a high stream of passive income from dividend investing that can "replace" my active income. The passive income  is not taxable on our end!