Pay with CPF money?

[gilaone]

Scenario like this: A couple at 40 yrs old. PC housing loan monthly installment $2000. CPF OA account monthly contribution $2000 (each contribute $1000). HDB fully paid rent out income $2000.

Should the couple use the HDB hard cash to pay the housing loan installment or use the CPF OA account to pay for it?

Or even best, use CPF to pay for it, then end of the year use the hard cash to top up $7000 each to get the tax rebate?

Any thoughts? What will you do?

[chestnut]

Scenario like this: A couple at 40 yrs old. PC housing loan monthly installment $2000. CPF OA account monthly contribution $2000 (each contribute $1000). HDB fully paid rent out income $2000.

Should the couple use the HDB hard cash to pay the housing loan installment or use the CPF OA account to pay for it?

Or even best, use CPF to pay for it, then end of the year use the hard cash to top up $7000 each to get the tax rebate?

Any thoughts? What will you do?

Do you want to retire with cash or retire with cpf???.

[roly8]

can you meet the minimum sum when you retire?
you must top up if your account did not meet the minimum sum.

[chestnut]

can you meet the minimum sum when you retire?
you must top up if your account did not meet the minimum sum.

Are u asking me??????

[roly8]

Are u asking me??????

no la..

ask TS

[chestnut]

no la..

ask TS

Oh... His hdb fully paid... What do u think????

[evergreen]

Do you want to retire with cash or retire with cpf???.

Exactly!

[gilaone]

Do you want to retire with cash or retire with cpf???.

Given a choice, I believe most will want to be cash rich than CPF rich.

The question is more like do you want to keep the money in CPF to earn interest or to convert it to hard cash so you can wrack on the stock or property should opportunities arise.

And the 2nd part - to top up back the CPF OA to get the tax break. Isn't this like a loophole?

[phantom_opera]

Given a choice, I believe most will want to be cash rich than CPF rich.

The question is more like do you want to keep the money in CPF to earn interest or to convert it to hard cash so you can wrack on the stock or property should opportunities arise.

And the 2nd part - to top up back the CPF OA to get the tax break. Isn't this like a loophole?

Gila, top up to SA then got tax break

[gilaone]

Gila, top up to SA then got tax break

Is it! Tot can top up to OA then later can again "recycle" to pay the mortgage -- Fat hope huh

Thanks for this important piece of info. Kamsia kamsia

[chiaberry]

Gila, top up to SA then got tax break

From CPF website:

To qualify for tax relief for cash top-ups for spouse/siblings, your spouse/sibling (i) must not have income exceeding $4,000 in the year preceding the year of top-up (e.g. salary or tax exempt income such as bank interest, dividends and pension) or (ii) is handicapped.

http://mycpf.cpf.gov.sg/Members/Top-Up_LO.htm

[repanse71]

Is it! Tot can top up to OA then later can again "recycle" to pay the mortgage -- Fat hope huh

Thanks for this important piece of info. Kamsia kamsia

Yes, for the same $7k to pay mortgage, if pass thru' CPF, it would be considered as (or locked into) OA.
Once you hit the CPF min sum, it's no longer an issue.
I have been doing it for many years now for tax savings.
I actually ask/lobby my MP to fight for increasing the $7k cap :-)

Regards

[phantom_opera]

I don't understand why so exicted about the tax relief, it is so little that it is not worth doing sometimes

ok, let's analyze:

First $80,000 $3350 ... this is only 4.2% ... by contributing to SRS/top up CPF, you save roughly 4% x 20k = $800 (ok ... great)

First $120,000 $7950 .. this is only 6.6% ... by contributing to SRS/top up CPF, you save roughly 6.5% x 20k = $1300 (ok ... great, roughly 100 per month only)

First $160,000 $13,950 ... this is only 8% ..
by contributing to SRS/top up CPF, you save roughly 8% x 20k = $1600 (ok ... great, your last insurance distribution cost is more than that)

I could be wrong, I contributed once to SRS just for fun, then no more ... any comment?

[chestnut]

Bro, if more than 320k, anything taxable is 20% leh... That means if additional 10k income, u pay 2 k leh.... S if your property generate say 100k nett, u pay 20 k tax hor....

Hahahahahahaha

I don't understand why so exicted about the tax relief, it is so little that it is not worth doing sometimes

ok, let's analyze:

First $80,000 $3350 ... this is only 4.2% ... by contributing to SRS/top up CPF, you save roughly 4% x 20k = $800 (ok ... great)

First $120,000 $7950 .. this is only 6.6% ... by contributing to SRS/top up CPF, you save roughly 6.5% x 20k = $1300 (ok ... great, roughly 100 per month only)

First $160,000 $13,950 ... this is only 8% ..
by contributing to SRS/top up CPF, you save roughly 8% x 20k = $1600 (ok ... great, your last insurance distribution cost is more than that)

I could be wrong, I contributed once to SRS just for fun, then no more ... any comment?

[phantom_opera]

Bro, if more than 320k, anything taxable is 20% leh... That means if additional 10k income, u pay 2 k leh.... S if your property generate say 100k nett, u pay 20 k tax hor....

Hahahahahahaha

bro chestnut,
did u see I leave out 320k ?? How many people have that kind of income, note we are talking about individual, not family income leh ... and if your annual income > 320k, you can set up biz to reduce tax effectively, why rely on SRS/7k CPF tax relief

Your annual income of $320,000
is higher than 97.2% of all resident taxpayers.

[chestnut]

bro chestnut,
did u see I leave out 320k ?? How many people have that kind of income, note we are talking about individual, not family income leh ... and if your annual income > 320k, you can set up biz to reduce tax effectively, why rely on SRS/7k CPF tax relief

Your annual income of $320,000
is higher than 97.2% of all resident taxpayers.

Set up biz to reduce tax? New to me... Can enlighten????

[gilaone]

I don't understand why so exicted about the tax relief, it is so little that it is not worth doing sometimes

ok, let's analyze:

First $80,000 $3350 ... this is only 4.2% ... by contributing to SRS/top up CPF, you save roughly 4% x 20k = $800 (ok ... great)

...

Your calculation maybe slight inaccurate. It imay not worth doing when the yearly income is low. But once it hit 120k per annum, it makes quite a diff. Tax rate for 80k above is 11.5% and 120k+ will be 15%. So if we are talking about 20k *15% that is 3k or $250 per month. Plus the base tax it can go up to some 800 a month. That's quite substantial.

And if this money is locked and you can't use it then it is indeed an opportunity cost. But if the SRS can be used to invest in stock and the OA money can be used to repay the mortgage loan, it should be plus.

[gilaone]

Yes, for the same $7k to pay mortgage, if pass thru' CPF, it would be considered as (or locked into) OA.
Once you hit the CPF min sum, it's no longer an issue.
I have been doing it for many years now for tax savings.
I actually ask/lobby my MP to fight for increasing the $7k cap :-)

Regards

You mean the money can go to OA?

And glad to know someone is already doing so. I tot of that 2 weeks back but undecided hence no action. Anyway the damage is done. Have another 11.5 months to research this.

[phantom_opera]

Bro gila, my calculation is based on new 2012 tax rate pls check

[roly8]

bro chestnut,
did u see I leave out 320k ?? How many people have that kind of income, note we are talking about individual, not family income leh ... and if your annual income > 320k, you can set up biz to reduce tax effectively, why rely on SRS/7k CPF tax relief

Your annual income of $320,000
is higher than 97.2% of all resident taxpayers.

good post.
still got other way to reduce tax

[gilaone]

Bro gila, my calculation is based on new 2012 tax rate pls check

Bro Phantom,
I think we still refer to the same page:
http://www.iras.gov.sg/irasHome/page04.aspx?id=1190

But you take the 3rd col to calculate the average tax rate may not necessary. We should use 2nd Col tax rate to calc the saving. Anyway this is not important. I have a friend which is pretty affluent with multiple sg and us prop and millions in stock market - daily fluctuation a few k. But he is excited when show me the investment books he got cheaper from Amazon by that few dollars saved.

No right or wrong. Just different different ways in financial management. I get what you mean. You are the hit the big profit and forget the small thing type 四海好漢！

[buttercarp]

bro chestnut,
did u see I leave out 320k ?? How many people have that kind of income, note we are talking about individual, not family income leh ... and if your annual income > 320k, you can set up biz to reduce tax effectively, why rely on SRS/7k CPF tax relief

Your annual income of $320,000
is higher than 97.2% of all resident taxpayers.

That's provided you are allowed to set a business. If you are a salaried worker, your organization may not allow you to have other business.

If you are self employed, then it is possible.
Got a friend who got an accountant to sort it out for her.
So she told me something like that.......
Her house is considered the office, so the furniture in her study and all the stuff eg computer, printer, aircon etc there are considered office things and can be used as the expenditure to offset her income.
Then her car which she uses for work can be considered as company car.
These are examples of how to reduce tax effectively, but it is better to consult an accountant so that everything is done properly and legitimately.

Last time got a friend whose father runs his own business, so he employed his kids as his employees and contributed employer CPF to their accounts.

[phantom_opera]

The tax rate is getting less and less therefore your tax relief on SRS getting less, sometimes there is one time tax rebate of 20% which u can take advantage

Also do u know capital gain n dividend thru SRS is subject to tax when u sometimes really need to withdraw?

[Regulators]

never use cof to post housing mortgage coz when you sell have to put back interest into account, defeats the purpose of govt helping ppl to save

[roly8]

never use cof to post housing mortgage coz when you sell have to put back interest into account, defeats the purpose of govt helping ppl to save

you mean never use cpf to pay housing mortgage ?

if sell the house, must pay interest back (for those cpf amount) ? i don't know must pay interest.

[phantom_opera]

you mean never use cpf to pay housing mortgage ?

if sell the house, must pay interest back (for those cpf amount) ? i don't know must pay interest.

mr roly ... welcome to the brutal new world

[chestnut]

never use cof to post housing mortgage coz when you sell have to put back interest into account, defeats the purpose of govt helping ppl to save

Brudder, when u use cpf to pay and get rental in cash - is it better???
When u sell, u pay back interest rite. The interest is it yours???
Can u reuse this money for your other investment property or for your new property???

So honestly, I don't get why shouldn't use cpf to pay for mortgage...

When can u draw out the cpf monies??? The min sum increases every time. Hahahahaha

[chestnut]

So assume salaried worker and coy allow setting up biz, how will this lower taxes??????

I don't see anyway leh.... Because even your biz needs to have profit before you can start utilizing expenses on car, etc...

That's provided you are allowed to set a business. If you are a salaried worker, your organization may not allow you to have other business.

If you are self employed, then it is possible.
Got a friend who got an accountant to sort it out for her.
So she told me something like that.......
Her house is considered the office, so the furniture in her study and all the stuff eg computer, printer, aircon etc there are considered office things and can be used as the expenditure to offset her income.
Then her car which she uses for work can be considered as company car.
These are examples of how to reduce tax effectively, but it is better to consult an accountant so that everything is done properly and legitimately.

Last time got a friend whose father runs his own business, so he employed his kids as his employees and contributed employer CPF to their accounts.

[Regulators]

You don't get my point. ppl put money in cpf for money to grow, not to take out and use and later pay yourself interest. if you use cpf to buy pty, you are saving govt a lot of money.

Brudder, when u use cpf to pay and get rental in cash - is it better???
When u sell, u pay back interest rite. The interest is it yours???
Can u reuse this money for your other investment property or for your new property???

So honestly, I don't get why shouldn't use cpf to pay for mortgage...

When can u draw out the cpf monies??? The min sum increases every time. Hahahahaha

[chestnut]

You don't get my point. ppl put money in cpf for money to grow, not to take out and use and later pay yourself interest. if you use cpf to buy pty, you are saving govt a lot of money.

Brudder, I got your point. You didn't get mind...

If u have say 3 properties, or even 2, u must use cpf??? Use cpf to pay and get back cash.... Use your cash to invest.... You put in cpf for what??? They keep increasing minimum sum... I already way above min sum in my SA. Hahahahahaha...

Bro, relook your strategy - serious.... If u want I can explain to u step by step... You share your step by step theory and I will share where your 'flaw' is... Trust me... I study policies in depth...

Hahahahahaha