7 ways Malaysians can pay less income tax in 2022

For all his reputation as a genius, even Albert Einstein was quoted by his accountant as saying “The hardest thing in the world to understand is income taxes”.

So on that note, we have to clarify a couple of terms used in this article:

• The year of assessment: The calendar year from Jan 1 to Dec 31, in which your income is assessed and taxed. For example, by April 30th 2022, you file and pay tax for what you earned in the 2021 year of assessment
• Tax filing: Filling in a form to provide information about how much you earned in the year of assessment. For individual taxpayers in Malaysia, this can be done through a manual paper form, or through an online e-filing system (ezHASiL)

Because most of these initiatives are for Budget 2022, it means that they can only be used during the 2022 year of assessment. However, some are extensions of already-existing initiatives, which means that they can be applied for the current year when you file your taxes in 2022. We’ll mark these down in a nice thick blue font for you but, yea, taxes are confusing.

Here’s a list of new initiatives for personal tax introduced in Budget 2022:

9% EPF deduction extended, SOCSO tax relief increased

For permanent employees, one thing we have to note in advance is that the government has extended the optional 9% minimum EPF contribution till June 2022. This means that instead of having the usual 11% taken out of your salary every month, you can ask your company to take out 9% instead – in other words, more take-home salary but less for your retirement savings (your company still pays the same percentage though).

Depending on your salary, this may also affect the amount of tax relief you’ll get; which is a maximum of RM4,000 in EPF contributions. There’s also a small increase in tax relief for SOCSO contributions from RM250 to RM350, which will also include contributions to the Employment Insurance Scheme (EIS) as well.

Freelancers and gig workers also get up to RM4k in EPF tax relief

Freelancers, self-employed, and gig workers have traditionally been left out of the EPF loop simply because there’s no requirement to do it.

Well, Budget 2022 is fixing that by making allocations to also provide the same RM4,000 tax relief if you voluntarily make contributions to your EPF account. Even though this will only start in 2022, it’s not a bad idea to start growing a nest egg for retirement especially if freelancing or gig-working is your full time job. Check out the EPF self-contribution page to see how you can do it.

Btw, this can also apply to public servants who are on the pension scheme.

Tax relief for education across all ages

We’re going to start from young to old(er).

• Kindergarten and nursery fees

A parent sending their kids to registered nurseries and kindergartens can claim up to RM3,000 in tax relief for the fees. This will apply for the current year – meaning you can claim the amount when you file your taxes in 2022 – and has been extended till the year of assessment 2023 (which you will file and pay by April 2024).

When to file: 2022, 2023, and 2024

• Skim Simpanan Pendidikan Nasional

If you’re a parent thinking super far ahead for your young kids, you can also start saving ahead for their tertiary education through the Skim Simpanan Pendidikan Nasional (formerly known as Skim Simpanan Pendidikan 1Malaysia), which is kinda like EPF, except to help pay their course fees. There are a bunch of other perks, but the tax-related one is that you can claim up to RM8,000 in relief for this year, and extended till year of assessment 2022.

When to file: 2022 and 2023

• Educational and upskilling courses for yourself

If you’re looking to go back to school and paying out of your own pocket, you can claim up to RM7,000 in tax relief for the course fees, as long as you’re in a recognized higher education institution (ie, colleges or unis). This has actually been around for a while, but what’s new is that the relief now includes fees from approved professional bodies for courses in Accounting, Finance, and Environmental, Social and Corporate Governance (ESG).

For those looking to pick up or further develop new skills, the tax relief for the cost of upskilling courses will be increased from RM1,000 to RM2,000 up to the 2023 year of assessment. For this year though, it’s still at RM1,000.

When to file:

• • RM1,000 in 2022
  • RM2,000 in 2023 and 2024

An extra RM2,500 tax relief for electronic gadgets

This one isn’t new, but it’s going to come in handy if you need a new device for work or otherwise. Basically, there’s already a RM2,500 Lifestyle Relief which covers purchases of educational reading material (electronic or printed), electronic devices, and internet subscription.

However, during the work-from-home year of 2020, the government introduced a special tax relief for an additional RM2,500 if you buy a computer, smartphone, or tablet, which has been extended to December 31st 2022. So yea, this will apply for the current year as well.

When to file: 2022 and 2023

2022 is a good time to become an Esports champion

The government has been focusing on developing our local Esports scene for a while, this time with a RM20 million allocation under Budget 2022.

However, what’s interesting is that any prize money you might win from selected international tournaments will be tax-exempted. Essentially, this means that the prize money won’t be counted as part of your taxable income.

Tax relief for medical expenses now includes mental health & C19 tests

In 2021, the maximum tax relief for the treatment of serious illnesses was raised from RM6,000 to RM8,000; and this includes costs for yourself as well as children and/or spouse. From this total, up to RM1,000 can be claimed for medical examinations.

But in 2022 (and possibly beyond), that stethoscope has been expanded to include mental health examination and consultations from registered psychiatrists, psychologists, and counsellors; as well as C19 detection tests.

Also, there will be a relief for C19 booster shots, if you pay for them yourself.

Up to RM1,000 tax relief on domestic travel expenses remains

Earlier in 2020, the government announced a domestic travel expenses tax relief up to RM1,000 for accommodation and entry fees to tourist attractions, in order to revitalize the local tourism industry. This is applicable for the current year, and has been extended till the end of 2022.

There is a small catch though… you have to stay at a hotel that’s registered with the Ministry of Tourism, Arts, and Culture. Here’s a link to the full searchable list of hotels on their site.

When to file: 2022 and 2023

Don’t forget to keep your receipts!

There are some additional tax reliefs that we didn’t fully cover such as RM2,500 for Electric Vehicle charging facilities, and the extension of the RM3,000 relief for contributions to the Private Retirement Scheme (PRS). But you can get the full scope of these, plus other benefits that aren’t income tax related on the Manfaat Bajet 2022 website.

That being said, while nothing beats the feeling of seeing your final tax amount lowered; we should probably remind you that keeping actual official receipts is really important in the event you kena a tax audit from LHDN – in fact, you’re actually required to keep your receipts for 7 years. So yea, you’ll want to be honest about these relief claims as well, just sayin’.