Belanjawan 2025 : The Breakdown

Budget 2025, unveiled on October 18, 2024, by Finance Minister Datuk Seri Anwar Ibrahim, promises a mix of goodies and tweaks for Malaysians. This analysis aims to break down the key points and explore their potential impact on individuals and the economy.  

Good News for Taxpayers (Especially Parents and the Disabled):

Enhanced Tax Relief for Insurance Premiums

One of the key updates from Budget 2025 is the increase in tax relief for education and medical insurance premiums, which has been raised to RM4,000. This provides a better cushion for individuals and families who want to invest in their education and health protection. As medical expenses continue to rise, especially with the evolving needs for healthcare, having this increase helps offset some of those financial pressures.

Additionally, tax relief for medical expenses up to RM10,000 will now include payments made under co-payment insurance and takaful products. This means that if you’ve opted for insurance plans that require you to share part of the medical costs with your insurer, those out-of-pocket payments will also be claimable.

• Medical expenses get broader coverage. This includes co-payment insurance and takaful products, easing the burden of medical bills.  
• Tax reliefs extended. Contributions to Private Retirement Schemes (PRS), deferred annuities, and net savings in the SSPN education savings scheme benefit from extended tax relief periods.  
• Overseas income gets a tax break. Malaysians receiving income taxed abroad get an exemption extended to December 31, 2036.  
• People with disabilities (PWD) see bigger tax relief. Relief is increased to RM7,000 for individuals, with adjustments for couples and families with disabled children.  
• Tax relief for senior citizens expands. Payments for vaccinations and grandparents’ medical bills are now included.  
• Tax relief for childcare covers senior care. This allows claiming relief for caring for parents and grandparents.  

Tax Relief for First-Time Home Buyers

Housing affordability continues to be a hot topic in Malaysia, and the government is offering tax relief for first-time home buyers in Budget 2025. If you’re buying a house valued below RM500,000, you can claim a tax relief of up to RM7,000 for three consecutive years. If the property is priced between RM500,000 and RM750,000, the relief is slightly lower at RM5,000, but still claimable for the same duration. This applies to any sales and purchase agreements signed from January 1, 2025, to December 31, 2027.

For those who have been delaying their first property purchase due to high costs, this relief offers a bit of breathing room and could make the decision to own a home more feasible.

Potential Impact: This is a positive step for many Malaysians. Increased tax relief for essential expenses like education, medical care, and childcare leaves more money in people’s pockets. Extending tax breaks for retirement savings and education plans encourages long-term financial planning. The focus on PWDs and senior citizens demonstrates a commitment to social welfare.  

Changes to Consider:

• Sales and Service Tax (SST) might rise. The government plans a progressive expansion starting May 2025. While basic food items remain exempt, non-essential items might see price increases. Think twice before splurging on imported avocados!  

Boost for Lower-Income Groups and Youths:

• Minimum wage increase. The monthly minimum wage goes up to RM1,700 from February 2025 (with a slight delay for smaller companies). This should improve living standards for low-wage earners.  
• Sumbangan Tunai Rumah cash aid increases. Eligible single individuals receive RM600, providing support for housing needs.  
• Continued My50 monthly pass. This benefits Klang Valley public transport users, easing commutes.  
• Enhanced i-Saraan contributions for informal workers. The government increases its matching contribution for retirement savings, encouraging long-term financial security.  
• Higher education support. The government will pay 50% of fees (up to RM15,000) for civil servants with over 15 years of service, making higher education more accessible.  

Potential Impact: These measures directly target lower-income groups and youths. Increased minimum wage and cash aid boost purchasing power. Subsidised public transport and retirement savings contributions address long-term needs. Support for civil servants’ higher education fosters career advancement.  

New Taxes on the Horizon

While there are plenty of tax reliefs to look forward to, higher-income earners and luxury consumers should prepare for new taxes. One major change is the introduction of a 2 per cent dividend tax for individuals earning more than RM100,000 in dividend income. This will kick in from the tax assessment year 2025 and applies to dividend income from non-retirement-related investments, such as shares and certain unit trusts. However, exemptions may be granted if the dividends come from EPF savings, Permodalan Nasional Berhad (PNB) unit trusts, or overseas dividend income.

Starting January 1, 2025, the excise duty on sugar-sweetened beverages will also increase by 40 sen per litre, adding to the cost of sugary drinks. This move is in line with the government’s health goals to reduce sugar consumption and encourage healthier choices.

Looking ahead to mid-2025, there will also be changes to how RON95 petrol subsidies are provided. The government plans to implement targeted subsidies for RON95 petrol, ensuring that only 85% of Malaysians continue receiving the subsidy, likely targeting lower and middle-income earners.

Something for the Young Guns:

• Free motorcycle licenses. This aids 15,000 needy youths, increasing mobility and employment opportunities.
• Flight ticket assistance. 60,000 students from Sabah and Sarawak can visit their hometowns more easily.
• Free BAS.MY transport. This benefit for students nationwide reduces transportation costs.
• Free ASB accounts. Permodalan Nasional Berhad offers free accounts to 100,000 new tertiary students.
• Step-up Financing. This offers lower payment facilities for the first five years for youths wishing to own their first homes.

Potential Impact: These initiatives directly support youths, addressing issues like mobility, affordability, and homeownership. The free motorcycle licenses and flight ticket assistance provide practical benefits. Free ASB accounts encourage savings and investment. Step-up Financing makes homeownership more accessible for young people.

Overall Assessment:

Budget 2025 presents a balanced approach, offering relief to the lower- and middle-income earners while making sure the wealthier groups contribute more. The government continues to expand on its social safety nets with targeted support for senior citizens, youth, and those with disabilities, while also encouraging long-term financial planning through retirement and education savings incentives. However, Malaysians who earn higher incomes or have substantial dividend earnings should prepare for a slight increase in their tax burden. Additionally, with targeted subsidies and a broader tax base (such as the sales tax expansion), it’s clear that the government is working to ensure the country’s economic resilience.

Key Takeaways:

• Tax relief and expanded benefits offer direct financial assistance to many Malaysians.
• Measures for PWDs, senior citizens, and youths demonstrate a commitment to social welfare and development.
• Changes to taxes and subsidies require careful consideration of their potential impact on different income groups.
• Overall, Budget 2025 is a balanced approach that aims to address various needs and promote economic growth.

Disclaimer: This analysis is based on the information available from the Budget 2025 speech. Actual implementation and impacts may vary. It’s advisable to consult with financial experts for personalised advice.

Sources:

• Malay Mail : https://www.malaymail.com/news/malaysia/2024/10/18/budget-2025-malaysians-heres-all-your-incoming-individual-income-tax-reliefs-and-if-you-are-a-worker-rm1700-minimum-wage-is-coming-too/154108#google_vignette
• The Star (Malaysia): https://www.thestar.com.my/news/nation/2024/10/18/what039s-in-it-for-you-in-budget-2025
• KPMG International: https://kpmg.com/my/en/home/media/press-releases/2024/10/budget-2025-advances-reforms-for-malaysia-s-economic-revitalization.html
• Datuk Seri Anwar Ibrahim’s Budget 2025 speech, October 18, 2024