Tell whether your work makes you a self-employed person and what follows from that.
In CPF terms, you are a self-employed person if you earn income from your own trade, business, profession or vocation. The CPF Board uses this term, and the rules attached to the status apply to you whether or not you know about them.
Three people you might know show how easily this gets missed. One friend has started doing wedding photography on weekends while keeping her office job. Another person drives private hire in the evenings. A third friend left her agency job last year and now takes design projects from three clients. If you asked any of them whether they were self-employed, they would probably shrug.
The CPF Board looks at how you are engaged. An employee works under a contract of service: someone employs you, directs how you work and pays you a salary, and your employer pays CPF on your wages. A self-employed person works under a contract for service, where a client pays you for work or results and nobody pays CPF on that income for you.
Freelancers, sole proprietors, partners in a partnership, and commission-based agents who are not employees usually count as self-employed, and so do many tutors, coaches, photographers and designers. Ride-hail and delivery work is different. Under the Platform Workers Act, MOM defines a platform worker as a ride-hail or delivery worker who has a platform work agreement with a platform operator and is under that operator's management control when providing the service in return for payment or benefit in kind (lesson 3.3 covers the changes). Taxi drivers are not among the workers named in that definition. If you can't tell which side your work falls on, the CPF Board and the Ministry of Manpower (MOM) both publish guidance on employees and self-employed persons.
Your status doesn't depend on what you call yourself or on whether you have registered a business. Someone who has never registered anything with ACRA can still be a self-employed person if the income comes from their own trade.
You can be an employee in one job and self-employed in another at the same time, as the friend with the weekend photography is. Her salary is employment income, so her employer deducts her share of CPF and pays its own share, and her housing and retirement savings grow every month without any action from her. Her photography fees are self-employment income. Nothing is deducted from them, and they are assessed once a year based on what she declares to IRAS.
Each stream follows its own CPF rules. The employment side runs through payroll, while the self-employed side is assessed separately once a year from your declaration to IRAS. It helps to treat them as separate sets of money with separate duties. People often assume the CPF paid on their salary also covers their side income, but the side income has its own rules and its own duties.
As an employee, CPF works as an automatic savings plan. Your contributions and your employer's go in each month, and part of that money builds towards a home and retirement. None of this happens on self-employment income, because the CPF Board does not collect housing or retirement contributions from trade income. The only part that may be compulsory is MediSave, which pays for healthcare. Your other CPF accounts grow only through voluntary contributions, which module 3 covers. Many freelancers find out years later that their CPF balances barely moved after they left their last job.
Whether MediSave is compulsory for you depends on your net trade income for the year, which is your trade income after allowable business expenses (lesson 2.2 explains how to work it out). If your yearly net trade income is above a threshold set by the CPF Board, MediSave contributions are compulsory. Below the threshold they are not compulsory, but you can still contribute voluntarily. The threshold can change, so look up the current figure on the CPF Board website instead of relying on what a friend remembers, and check it again every year you file.
Your MediSave contribution is worked out from the net trade income you declare in your tax return, which links your tax and your MediSave. If you don't file, or you file late, you still owe MediSave, and the bill is usually worked out on an estimate. Filing accurately costs you less, and module 4 shows why.
Mei, the designer from module 1, sorted her own year using example figures. She earned S$61,600 from design clients, all invoiced by her directly, and marked it as self-employment income. She was paid S$1,200 for teaching two weekend workshops at a design school, which paid her as a part-time employee and deducted CPF, so she marked that as employment income. She also earned S$180 in interest on her savings. Interest on savings is neither employment income nor self-employment income, so she marked it as neither. With all three listed and marked, she could see exactly which income the MediSave rules apply to.
Some of your own items may be harder to place, for example a one-off payment from a friend's company, a referral fee, or a prize from a design competition. Write each one down with your best guess beside it. If you are genuinely unsure about an item, mark it with a question for the CPF Board or IRAS and carry on with the rest. At this stage, getting your main income streams sorted matters more than placing every item.
Start with last year. Go through every source of money that came in, write each on its own line, and leave room to mark it as employment income, self-employment income or neither.
List every source of income you had last year and mark each one as employment, self-employment or other.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).