You will be able to follow each step on the notice of assessment from your income to the tax you owe.
Wei Jie is 33 and works as a physiotherapist at a hospital in Novena. Every year around the middle of the year he gets a notification that his notice of assessment is ready, opens it, looks at the tax payable at the bottom and checks that GIRO will take care of it. He has never read the rest of the page. This year his tax went up by more than his pay rise, and he couldn't say why.
The notice of assessment shows IRAS's working as well as its answer, and every figure above the tax payable is a step, and each step can be checked. This lesson walks through those steps in order, so that next time you can trace your own tax from the top of the notice to the bottom.
Start with the year printed on the notice. Singapore taxes income on a preceding year basis. The Year of Assessment, often shortened to YA, taxes the income you earned in the calendar year before it. So the notice for one Year of Assessment covers your income from January to December of the year before.
This matters when you check figures. If you changed jobs, got a raise or received a large bonus, look at last year's events, because this year's haven't been taxed yet. Wei Jie's raise came in the middle of the year the notice covered, which was part of why his tax moved.
The first figure on the notice is your income. For most employees, that's employment income: salary, bonuses, allowances and other taxable benefits.
Many employers take part in IRAS's auto-inclusion scheme. Under it, they send your employment income straight to IRAS, which uses that figure for your tax without you typing anything in. You may not even need to file a return if you're on the No-Filing Service, in which case the whole assessment is built from information others supplied.
That's convenient, and it's why it's easy to stop checking. But the figure is only as accurate as what your employer sent. If your employer reported the wrong bonus, or missed a payment, or left out a job you held for part of the year, the notice will carry the mistake. Your employer gives you a statement of your income for the year, usually the IR8A form. Lesson 4.2 shows you how to check one against the other.
The notice then works down to the income that's actually taxed, in a fixed sequence.
Total income is your employment income and any other income, less allowable expenses. Approved donations come off next, which gives your assessable income. That's the income IRAS considers before reliefs.
Then personal reliefs are deducted. These are amounts the law lets you take off for your circumstances: for example earned income relief, CPF relief on your compulsory contributions, and reliefs for supporting family members if you qualify. There's a cap on the total relief one person can claim in a year, and the IRAS website states it.
What's left is chargeable income, the amount your tax is actually worked out on.
Here's Wei Jie's path with example figures, chosen to show the arithmetic rather than to match any real person's tax. His employment income was S$60,000 and he had no donations, so his assessable income was S$60,000. His reliefs were S$1,000 of earned income relief and S$10,800 of CPF relief. S$60,000 minus S$11,800 gives a chargeable income of S$48,200.
Tax is then worked out on chargeable income using the resident tax rates, which are progressive: the first slice of income is taxed at zero, and each later slice at a higher rate. The notice shows the result, and IRAS publishes the full rate table for each Year of Assessment.
To see how bands work, take an invented table for practice only. Say the first S$20,000 is taxed at 0%, the next S$20,000 at 3%, and everything above S$40,000 at 6%. On Wei Jie's S$48,200, that's nothing on the first S$20,000, S$600 on the next S$20,000, and 6% of S$8,200, which is S$492, on the rest. His tax would be S$1,092. The real table has more bands and different rates.
Notice what the bands mean for a raise. The extra income lands in his highest band, so it's taxed at his highest rate. That's why his tax rose faster than his pay in percentage terms, even though nothing was wrong.
In some years the government grants a personal income tax rebate, which comes off the tax at the end. If there's one, the notice shows it as a separate line. The rate table, the rebate and the relief cap can all change from one Year of Assessment to the next, so read the current figures on the IRAS website, never from memory or from a friend's notice.
You can find your notice of assessment in myTax Portal, under your notices and letters, once you've logged in with Singpass. Older ones are usually kept there too.
When Wei Jie read his from top to bottom, every step made sense, from the raise and a slightly larger bonus to the same reliefs as the year before, and for the first time he knew why the number was what it was.
When you open yours, keep a blank page or a note on your phone beside it, because you'll be writing each step down in your own words.
Get your latest notice of assessment from myTax Portal and write out the path from total income to tax payable in your own words.
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