Case Study 1: Tax Planning for Personal Financial Goals

Scenario:

Aiman is a 30-year-old IT professional earning RM5,000 per month. He is planning to buy a

house in the next two years and needs to save at least RM20,000 for the down payment. Aiman
is aware that managing his taxes effectively can help him achieve his financial goals.

Below is a summary of Aiman’s financial information:

1. Monthly salary: RM5,000

2. EPF contribution: 11% by employee and 13% by employer
3. Tax reliefs:

•RM9,000 for personal relief

•RM6,000 for EPF and life insurance

•RM2,500 for lifestyle (books, gadgets, etc.)

4. Additional information: Aiman donated RM2,000 to a registered charity and spent

RM1,500 on medical expenses for his parents (eligible for relief).

Questions:

1. Based on Aiman’s income and reliefs, calculate his taxable income.

ANSWER:

Annual income = RM 5,000 × 12

=RM 60,000

EPF Contribution = 11% × RM 5,000

=RM 550 / month

Annual employee contribution= RM 550 × 12

=RM 6,600
Tax relief:- personal relief =RM 9,000

-EPF and Life Insurance = RM 6,000

-lifestyle relief = RM 2,500

-donation= RM 2,000

-medical expenses= RM 1,500

Total tax relief and other deductions = RM 9,000 + 6,000 + 2,500 + 2,000 + 1,500

=RM 21,000

Taxable income = Annual income - (personal relief + other deductions)

=60,000 - 21,000

=RM 39,000

2. Identify which tax deductibles apply to Aiman’s situation and explain their importance in
reducing his taxable income.

ANSWER:

[Link] Relief (RM9,000): This is a standard deduction available to all Malaysian taxpayers
to account for basic personal living expenses. It directly reduces Aiman's taxable income,
easing his tax burden.

2. EPF and Life Insurance (up to RM6,000): Contributions to EPF (Employee Provident Fund)
and payments for life insurance premiums are combined under this relief. These contributions
encourage financial security for retirement and provide coverage for unforeseen [Link]
can deduct contributions to his EPF or any premium paid on life insurance

3. Lifestyle Relief (RM2,500): for purchase includes spending on lifestyle-related expenses like
books, electronics, and subscriptions, promoting education, leisure, and digital adaptation.

4. Donation(RM2,000): Donations to approved charities are deductible, incentivizing acts of

kindness and social responsibility.

5. Medical Expenses for Parents (RM1,500): Supporting medical costs for parents aligns with
promoting family care and responsibility, while providing tax benefits.
 3. If Aiman’s calculated tax payable is RM2,400 for the year, how can he use effective tax
administration to manage this amount and align it with his goal of saving for a house?

● Monthly tax deduction (MTD): Requesting accurate monthly tax deductions can prevent
year-end tax surprises and improve his monthly savings.

● Tax-saving investments: Consider tax-deductible options like PRS (Private Retirement

Schemes) and SSPN (Education Savings Plans) to help save for a home.

● Maximize deductions: Aiman should claim all qualified reliefs, including additional
medical or educational expenses.

ANSWER :

4. Discuss the role of personal financial planning in balancing Aiman’s tax obligations and
his savings goal.

ANSWER :

● Budgeting and Cash Flow: Aiman's financial plan allows him to balance his income by
paying taxes, covering expenses, and saving for the future.
● Avoiding Overspending: By understanding his tax requirements in advance, Aiman can
manage his spending and ensure adequate money is set away for savings while not
forgetting his tax commitments.
● Reducing Tax Burden: Aiman can reduce his tax burden by making wise decisions, such
as contributing to tax-deferred retirement savings. This lowershis taxable income for the
current year.
● Maximizing Tax Reliefs: Aiman should take maximum use of the tax breaks available to
him. By lowering his taxable income, he may free up more money for savings.

Case Study 2: Determining Resident and Non-Resident Tax Status in Malaysia

Scenario:

Mr. John Smith, a software consultant from Australia, has been working with a Malaysian IT
company on a contractual basis. Below are the details of his time spent in Malaysia over two
years and his income situation:

Year 1 (January to December)

 1. Days in Malaysia: 190 days

2. Income from Malaysian Company: RM180,000

3. Other Global Income: AUD50,000 (from consulting in Australia)

Year 2 (January to December)

1. Days in Malaysia: 150 days

2. Income from Malaysian Company: RM150,000

3. Other Global Income: AUD60,000 (from consulting in Australia)

Mr. John wants to determine his tax residency status in Malaysia for both years and understand
how his income will be taxed under Malaysian law.

Questions:

1. Based on the number of days Mr. John spent in Malaysia, determine his tax residency
status for Year 1 and Year 2.

ANSWER:

● Year 1: Mr. John spent 190 days in Malaysia during Year 1, which is greater than 183
days. As a result, Mr. John will be regarded as a tax resident in year one.

● Year 2: Mr. John spent 150 days in Malaysia during Year 2, which is less than 183 days.
However, according to the two-year norm, he spent 190 days in Year 1 (and 150 days in
Year 2), for a total of 340 days over two years. As a result, based on the overall number
of days throughout the two-year period, Mr. John will be considered a tax resident in
Year 2.

2. Explain how resident and non-resident status affects the scope of taxation in Malaysia.

ANSWER :

Resident: A tax resident in Malaysia is taxed on income from worldwide sources

Non-Resident: A non-resident is taxed only on income generated from Malaysia

3. Calculate the taxable income in Malaysia for both years if:

 • Resident: Income from worldwide sources is considered.

• Non-Resident: Only income derived from Malaysia is taxable.

ANSWER:

Year 1 (Tax Resident Status)

● Income from Malaysian Company: RM180,000

● Global Income (AUD 50,000): Since Mr. John is a resident, his global income will be
included in the taxable income.
○ To calculate the taxable income in Malaysian Ringgit (RM), we need to convert
the AUD amount into RM.
○ Assuming the exchange rate is 1 AUD = 3 RM (for simplicity):
■ AUD 50,000 × 3 = RM150,000
● Total Taxable Income for Year 1:
○ RM180,000 (Malaysian income) + RM150,000 (global income) = RM330,000

Year 2 (Non-Resident Status)

● Income from Malaysian Company: RM150,000

● Global Income (AUD 60,000): Since Mr. John is a non-resident, only his Malaysian
income is taxable.
● Total Taxable Income for Year 2:
○ RM150,000 (only Malaysian income is taxable) = RM150,000