More Lower-Income Self-Employed Exempted From Compulsory Medisave Contributions

30 Sep 2002

The Ministry of Health is revising the minimum income criteria for compulsory Medisave contributions by self-employed persons from $2,400 to $6,000 a year. With the revision, self-employed persons earning less than $6,000 a year are not required to make compulsory Medisave contributions for their income earned in 2002. This will benefit an additional 15,000 self-employed persons as they can now retain more of their income for daily living expenses.

Raising the minimum income

Currently, employees have to contribute to their CPF accounts if they earn at least $200 per month (or $2,400 per year). The same criterion is used to determine whether a self-employed person is liable for compulsory Medisave contributions. However, as most self-employed persons do not have stable monthly income, annual net trade income is used to assess whether a self-employed person is liable for Medisave contributions. The minimum income for compulsory Medisave contributions by the self-employed person is currently $2,400 a year.

The Government has accepted the Economic Review Committee?s proposal to raise the income floor for employee?s CPF contribution from $200 a month to $500 a month with effect from 1 Oct 2002. In line with this change, MOH will similarly raise the minimum income for compulsory Medisave contributions by the self-employed persons from $2,400 to $6,000 a year. This means that compulsory Medisave contributions are not required from self-employed persons who earn less than $6,000 in 2002.

Currently, about 117,000 self-employed persons are exempted from Medisave contributions. With the revision, some 132,000 self-employed persons would not be liable for compulsory Medisave contributions, out of a total of 270,000 self-employed persons in Singapore. This is an additional 15,000 self-employed persons who will benefit from this new revision.

Adjusting the assumed income

At present, Inland Revenue Authority of Singapore (IRAS) does not assess the income tax of any self-employed person earning below $11,000 a year. For the purpose of determining Medisave contributions for self-employed persons, MOH has assumed that the annual net trade income of a self employed earning between $2,400 and $11,000 per year is $6,000 per year.

With the raising of the minimum income for compulsory Medisave contributions to $6,000 per year, MOH will correspondingly increase the assumed income to $9,000 per year for self-employed persons earning between $6,000 and $11,000 per year.

As per the current practice, self-employed persons who earn less than the assumed income could declare their income at the CPF Board and their Medisave contributions will be adjusted accordingly.

With the MOH revision to compulsory Medisave contributions, more self-employed persons can benefit by having more disposable income available for their daily expenses.