(Oct 28): The recent announcement of Budget 2025 where budget tax proposal changes affecting individuals was unveiled after weeks of anticipation. Many of the new proposals announced were aligned to the budget theme with a focus on “prospering” the rakyat. As a taxpayer, I was curious what “goodies” are in store for me and the rakyat. After reading through the budget speech, some of the following notable proposals in the speech captivated my attention:

One of the new proposals is in relation to tax relief for housing loan interest expenses. For this relief, taxpayers who purchased their first residential home would be eligible for tax relief of RM7,000 (cost of residential property is RM500,000 and below) or RM5,000 (cost of residential property is RM500,000-RM750,000) on the mortgage interest expended. This relief is claimable for up to three consecutive years of assessment (YA) where the sale and purchase agreements are executed from Jan 1, 2025 until Dec 31, 2027. It is worth noting that the property concerned must not be used to generate any income. First-time homebuyers would stand to benefit from this tax relief. Through this initiative, the government is trying to encourage the rakyat to purchase their first residential home by increasing their disposal income through the defraying of expenses incurred. This shows that the government is listening to the plight of the rakyat where many struggle to own a home.

Medical cost is a part of any individual or family’s annual expenses as anyone could fall ill and require medical assistance. However, unexpected health conditions could escalate medical expense bills and cause a dent in an individual or a family’s financial status. Household disposable income would then be affected. From the budget proposal, to ensure the welfare of the elderly is taken care of, it is proposed that full medical check-up for parents (limited to RM1,000) be expanded to include vaccination costs. The government has also proposed an expansion of parent’s medical expenses relief where the coverage for such expenses would also cover grandparents of the taxpayer. Additionally, the scope of purchase of sports equipment has been expanded to include such purchases made for parents. All of these budget proposals are effective from YA2025. The proposals presented herein are a refreshing initiative as the current tax reliefs on the aforementioned areas only covers medical expenses of the taxpayer’s parents and not medical cost incurred for the grandparents. It is also noteworthy to highlight that there seems to be a shift in focus towards preventive care (ie purchase of sports equipment and vaccination for parents) where it is no longer just about relief claims for medical care-related expenses.

Apart from medical cost, families with young children tend to incur education or childcare related expenses, as it is common for parents to send their children who are not of school going age (ie below age seven) to kindergartens and also childcare centres. The cost incurred on schooling fees and related expenses can be quite hefty, forming a significant part of their household expenses. In the budget, it is proposed that the current tax relief for fees paid to childcare centres and kindergartens of RM3,000 for children up to six-years-old be extended a further three years till YA2027. Similarly, the current tax relief for net deposits made to the National Education Savings Scheme (SSPN) of RM8,000 would be extended until YA2027. The extension will help parents to defray the rising cost of childcare while also encouraging them to continue setting aside funds for the children’s future education by depositing into SSPN.

The above measures would help alleviate the escalating cost of living for the “Sandwiched Generation” who are supporting both their elderly parents and children. It also acknowledges that in certain families, the extended family is beyond just three generations.

Currently, the tax relief claimable for medical and education insurance premiums in respect of self, spouse and child is RM3,000. It is proposed in the budget that the relief limit is increased to RM4,000 effective YA2025. This is a welcomed move, as generally the total premium paid for both medical and education insurance exceeds RM3,000 annually. The extra claim of relief could increase the disposal income of the taxpayer. It could also encourage taxpayers to reassess their existing policies to ensure adequate medical insurance coverage and savings for their children’s education are in place.

Based on the recent report by Khazanah Research Institute (KRI), over 90% of Employees Provident Fund (EPF) members under the age of 30 are not projected to reach the basic savings target of RM240,000 by retirement age. To encourage Malaysians to save for their retirement, the existing tax relief of RM3,000 for approved Private Retirement Scheme (PRS) and Deferred Annuity Scheme would be extended until YA2030. Further to that, to encourage informal workers and those without fixed income to save for their retirement, the EPF's i-Saraan matching incentive will be increased to 20%, subject to the annual matching incentive of RM500 or RM5,000 for Life.

Reflecting on the above, Budget 2025 introduced a series of proactive measures which would support individuals and families to navigate the challenges of rising living costs and also promote long-term financial stability. The tax measures highlighted reflect a forward-thinking approach with slight pivot towards preventive care, refreshing take on including medical expenses for grandparents and many more. As we move forward, it is hoped these measures can help foster a more prosperous future for the rakyat.

Michelle Lai is a global employer services director of Deloitte Malaysia.