Earlier this week, on 14th February, Deputy Prime Minister and Minister for Finance Mr Lawrence Wong delivered Singapore’s FY2023 Budget Statement – covering the Government’s strategy for the post-pandemic world and addressing concerns for businesses, workers, and households. With the theme “Moving Forward in a New Era”, Wong announced that the Government has plans to spend around S$104.2 billion in the coming year, focused on growing the economy while targeting immediate cost-of-living pressures.
Here are Syfe’s top picks from the Budget 2023, and what investors should look out for:
1. CPF monthly salary ceiling to be raised
The Central Provident Fund (CPF) monthly salary ceiling will be raised to $8,000 by 2026, up from the current $6,000 ceiling cap that can be used to drawn CPF contributions. This change will be implemented progressively in four steps, so that employers and employees can adjust more comfortably. The last change to the monthly salary ceiling took place in 2016, where it was adjusted from $5,000 to $6,000 in order to keep pace with wage growth.
What does this mean?
While this is meant to help middle-income earners reach their retirement goals faster with higher employee and employer contributions, it also means that they will see less disposable income progressively over the transitional period of four years, up till changes are completed in 2026. Investors may need to review their budget allocations more frequently for expenses, savings and investments to adjust to changes.
2. Tax increase for luxury property and cars
Higher-value residential and non-residential properties will see an increase of marginal BSD (Buyers Stamp Duty). This affects residential property with over $1.5 million value, as the portion of value between $1.5 million to $3 million on such property will be taxed 5%, while the portion of value in excess of $3 million will be taxed at 6% – up from the 4% rate currently. Wong announced that this is projected to generate an additional $500 million in revenue a year, but is dependent on the property market. The change is expected to impact around 15% of residential properties.
Meanwhile, buyers of luxury cars will need to take into account additional ARF (Additional Registration Fee) rates. Cars with open market value of over $40,000 will require higher marginal ARF rates. This is expected to affect the top one-third of cars, although cars with open market value of $40,000 or less will not see any changes.
What does this mean?
The local real estate sector may see a slow down in demand and sales, as consumers reconsider snapping up property in the immediate future with the hike in stamp duty. For investors who have plans to purchase higher value property and luxury cars will need to budget more in their financial planning in order to effectively absorb this tax increase.
3. Measures to help aspiring or new families and young parents
The Baby Bonus Cash Gift will be increased by $3,000, while Child Development Accounts (CDA)- the co-savings scheme that defrays the expenses associated with child-rearing, such as preschool and healthcare costs- will receive additional government contribution of a one-off $400 top up, among other increases in cash support. In terms of leave, paid paternity leave will be doubled from two to four weeks.
What does this mean?
While couples can look forward to more financial support especially in the earlier years of having a child, planning for a family requires a long-term view. Parents will need to factor rising costs such as expenses, child care and education into consideration.
This year’s Budget looks towards measured enhancements to cushion impact on businesses, households and individuals, while strengthening Singapore’s social compact. In light of these changes, it’s an optimal time to refine your financial goals, and adjust your priorities to ensure your financial roadmap is future-proof.
Take a look at Syfe’s curated resource bank to guide you through this journey:
- Key Investment Trends to Look Out for in 2023
- Recession Proof Stocks And Strategies To Consider in 2023
Or, contact one of our wealth experts to learn how to adjust your financial plans for 2023 today.