Monday February 22, 2010

How to pay less personal tax

By ANG WEINA

THE 2009 tax-filing season for individuals has arrived. For many of us, April 30 will be just another day (perhaps accompanied by scrambling for our just-in-time filing) to settle our dues with the Inland Revenue Board by submitting the Form e-BE and paying any balance tax.

Before clicking the button to complete the e-filing, take a second look at the figures keyed in. Is the amount of tax calculated the lowest it can be? Here are some tips on saving tax that would not get you in trouble with the law.

1. Know your income: What is taxable and what is not.

Gone are the days when you agonise over the delay in receiving your Form EA from your employer. It is now a law for employers to issue the Form EA to their employees no later than the end of February. The key point to note is not all income in your Form EA is taxable! Scrutinise all the items in Form EA to see if there is any which should be tax-free. For example:

Travelling allowances

If you receive travelling allowance, up to RM2,400 for your travels from home to office is tax-free. What this means is if you receive an allowance of RM12,000 for such travel, you can deduct RM2,400 and only RM9,600 is taxable. Further, travelling allowance of up to RM6,000 for official duties is tax-exempt.

Meal, parking and childcare allowances

Many employees receive these allowances, do you? You would be happy to know that you can enjoy such perks with no worries about paying tax thereon (up to RM2,400 in the case of childcare allowance).

2. Make the most of all tax-free benefits.

Medical benefits

Medical benefits for traditional medicine including ayurvedic, plus maternity benefits are also tax-free.

Interest subsidies

Your employer may have subsidised interest on your housing, car and education loans. In the past, these subsidies would be taxable on you. Now you would be glad to know such interest subsidies are tax-exempt (so long as the total loans do not exceed RM300,000).

Broadband and telephone benefits

Who can leave home without the iPhone, Blackberry or PDAs nowadays? Getting such a device from your employer plus reimbursement for broadband and telephone bills are tax-free. So take advantage and enjoy the latest gadgets and services.

3. Know your limits.

Just as in drinking and driving, stay within the limits to avoid any trouble or triggering tax.

If you have enjoyed any staff benefits like discounts on your company’s goods or services and kept within the RM1,000 a year limit, you should enjoy tax exemption thereon.

Did you receive a small token from your employer on your achievements in service excellence, innovation or productivity which brought on a smile? Don’t blame your employer if they kept the awards below RM2,000 as no tax should be levied on you. Neither is the award for your long service with the company (for more than 10 years) forgotten. As long as your employer kept the value of all awards to you within the RM2,000 limit, the smile should remain on you.

4. Look for more tax-free income.

Bank interest income

You will note a subtle difference in your bank statement nowadays as it no longer shows the amount of tax withheld. Bank interest income is now tax-exempt.

Dividends

Dividends need not be entirely taxable. Have a good look at the dividend voucher. If it states that the dividend is “tax-exempt”, then it is not taxable anymore.

5. Gain more deductions.

Purchase of sports equipment

If the slimming fad has caught on with you, keep the receipts of your purchases of any sports equipment. A claim of up to RM300 is a small incentive to shape those curves and muscles in a big way!

Have receipts or evidence to support more deductions

Medical expenses for your parents certified by a medical practitioner (restricted to RM5,000);

Medical expenses for serious diseases for self, spouse or child (up to RM5,000), including a complete medical examination for self, spouse or child limited to RM500;

Basic supporting equipment for disabled self, spouse, child or parents (ceiling of RM5,000);

Disabled person (self) (RM6,000);

Disabled husband/wife (RM3,500);

Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications for a masters or doctorate level, undertaken for the purpose of acquiring any skill or qualification (limited to RM5,000);

Purchase of books/journals/magazines/similar publications for self, spouse or child (up to RM1,000);

Net deposit in National Education Savings Scheme (ceiling of RM3,000);

Purchase of personal computer for individual (maximum deduction of RM3,000 allowed once every three years);

Premiums on life insurance plus EPF and other approved fund contributions (subject to RM6,000 restriction);

Premiums for education or medical insurance (restricted to RM3,000);

Relief of up to RM10,000 on the housing loan interest paid (conditions apply);

Payment of alimony to former wife (maximum total deduction for wife and alimony payment is RM3,000);

Zakat other than monthly zakat deduction from salary; and

Fees/levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

The rule of the “game” of keeping your tax liability to the minimum when preparing your tax return Form e-BE is to do it right within the law. For a start, make the website of the Inland Revenue Board, www.hasil.gov.my, one of your favourites from now until April 30 to access its easy to read guides. Happy e-filing!

● Ang Weina is executive director and global employer services leader with the tax practice of Deloitte Malaysia.

http://biz.thestar.com.my/news/story.asp?file=/2010/2/22/business/5708847&sec=business

Nov 26, 2009

Is it time to hedge mortgage bets?

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Malaysian born British trained mortgage consultant Jonathan Yip gives his views on mortgages… JONATHAN YIP

For many, a mortgage – which is simply paid every month and then forgotten about – is their largest financial commitment. Consumers have the option to choose either the fixed or floating rate mortgage.

In the constantly-evolving finance market, it is always important to understand the potential future consequences of decisions made today. This way, educated decisions can be made in response to the economic climate as and when it changes.

Most home loans will normally fall into one of two broad categories: the fixed rate or floating rate mortgage. There may be countless different packages with many differing features, but they still fall under these two categories.

Fixed rate loans
Fixed rate mortgages do exactly what they suggest; the interest rate is fixed, which means that monthly payments are fixed as well.

In Malaysia, insurance institutions offer these loans. For most of them, the interest rate is fixed for the entire mortgage term. Therefore, a borrower is not only protected from any interest rate fluctuations in the open market, but he also knows exactly what his monthly installment is for the entire lifetime of the loan.

However, most lenders will tie the borrower to the product for a set period (usually around 5 years) by way of a penalty. Hence, if the decision is made to redeem the mortgage within the first 5 years, a penalty is imposed. It is generally calculated with a formula that takes into account the remaining term of the loan and the amount repaid.

The downside is that if interest rates in the open market fall, there is no benefit since the rate is locked.

Floating rate loans
Floating rate mortgages are a variable loan that typically tracks the BLR (base lending rate). It can either track higher or lower than the base rate. Most, if not all floating rate loans are currently tracking below the BLR, roughly in the region of BLR -1.8%.

In most cases, the loan will continue to track at the same margin for the entire loan term (although some banks may attract new business by offering an extremely low floating rate, which increases after the first few years).

Floating rate mortgages can also be pegged against the 3 month KLIBOR (the Kuala Lumpur Inter-Bank Offered Rate), which is the interest rate banks use when lending each other. However, this method is relatively unusual.

Floating rate mortgages can be influenced by changes in the economy: roughly speaking, if demand increases resulting in an upward inflationary pressure, monetary policy dictates that the BLR increases. This may mean the borrower’s monthly payments will significantly increase. On a positive note, interest rates could fall too and the borrower will pay lower monthly installments.

At present, the fixed rate interests are just under 5% while floating rates are around the 3.8% mark. So the golden question is whether to fix or float?

To fix or to float?
There are numerous factors to take into account when deciding which type of mortgage to go for. At first glance, the floating rate package seems much better because a difference of more than 1% will certainly have a large impact on monthly payments. There is obviously a significant difference in price, but it is worth remembering that the BLR is at an all time low.

Market watchers believe that the BLR rates could increase and this means that opting for a floating rate could be more of a gamble instead.

Secondly, the risk-to-reward ratio should be taken into consideration. Irrespective of economic conditions, it is obvious that a 3.8% floating rate can only fall by a maximum of 3.8%, while there is no limit to its increase. If however, the BLR is at 9%, then the potential reward for taking a floating rate is much greater as it could fall much further. However at present, it is at the all time low of 5.55%.

Also, a mortgage commitment is not just for a few months. On average, it is around 3-5 years. So, while floating rates are especially cheap at the moment, it is difficult foresee that the fixed interest rate will fall below 5%.

Even if the BLR stays low for the next 5 years, and therefore (with future hindsight) the fixed rates of today are undesirable in comparison to current floating rates, the peace of mind one gets from a fixed rate should be enough to prevent the average risk-averse borrower from worrying about what they could have “gained” if they settled for a floating rate mortgage.

http://starproperty.my/PropertyGuide/Finance/769/0/0

Mar 9, 2010

Property investment: Opportunities at property auctions

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While property auctions used to be looked at with disdain, the situation has changed in recent years. The proclamation for sale notices in newspapers used to be small and almost inconspicuous, but today they are in full colour and often spread across three to five pages.

So, what brought about this change? I believe that the public has woken up to the fact that they can get good deals from property auctions. For example, a few years ago, I bought a double-storey link house in Subang Jaya at an auction for RM220,000 and then sold it seven months later for RM280,000. A few friends did even better. One bought an apartment in KL worth RM180,000 for just RM96,000 and another bought a house worth RM350,000 for RM240,000. These are just a few examples that I know of. There are certainly more exciting and grander stories out there.

So even if you have never considered property auction, you do some research on the subject matter. The potential of making money from property auctions is indeed there. However, there are many aspects that you must first learn before venturing into property auctions.

Firstly, there are hundreds of properties being auctioned every month. In other words, the supply is huge, but there will be some gems among them. You can locate details of property auctions from newspapers and the Internet. Turn to the classifieds pages in the newspapers, and you should find the proclamation for sale notices. As for the Internet, you can check updated property auction listing in this website or do a quick online search on ‘property auctions Malaysia’ and hundreds of links will be displayed.

You should always bear in mind two key factors below before investing.

• Price
Always compare the market price to the auction price as a property being auctioned at the market price isn’t an ideal investment. You might as well purchase that said property from the open market as there will be less problems that way.

• Location
If the property is in a poor location, you should not invest in it even if it is available at a low price. There is much truth to the saying – location, location, location. You might’ve purchased it for a bargain, but if there are no buyers, the price could remain low for a long period of time.

Usually, there are only about ten percent of properties from auctions that you can consider. While the percentage is low, the numbers is certainly adequate. For example, ten percent of two hundred listings is twenty. Surely there are one or two good deals from that number.

Return to this website soon as I will be revealing more tips in the next article.

http://starproperty.my/PropertyGuide/Finance/2886/0/0

By Venus Hew | Sep 8, 2009

5 Tips to Speedy Home Rental

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Are you in a hurry to rent out your home? StarProperty speaks to an industry expert on some tips and guides to help you in getting the tenants you want, the fastest way.

1. Knowing who to target
In short, it means knowing your target market and trying your best to cater to your potential tenants' needs. However, bear in mind that target market will also depend on the type of property, size and the location you are offering.

In terms of property and size, studio units are typically associated with students or young working executives. As they are relatively small, studio units are used by people who do not need larger living arrangements, particularly those who are single. "Renting bigger homes may be unnecessary and well above their budget", says Tang Chee Meng, Chief Operating Officer of Henry Butcher Marketing Sdn Bhd.

Whereas for families with children, landed terraced houses or condominiums with 2 to 3 rooms appeal more to them than the studio units. Apart from that, a majority of them also prefer unfurnished homes as they are at liberty to plan out the interiors according to their style.

On the aspect of location, if you are renting out a condominium within the expatriate-populated Mont' Kiara, it is highly likely your tenants are expatriates i.e. the Japanese and Koreans who fancy condominium lifestyle in the area.

"Therefore, landlords who know exactly the group of people they are targeting and furnish their homes according to their needs, will benefit from those who do not", Tang notes.

2. Physical rules still count
Now knowing who you are targeting, are you spending enough effort to make your home appeal to your potential tenants? Henry Butcher's Tang says it is important to make certain that your home looks not only presentable but appears "attractive" to potential tenants who will call in to view your home.

Though the definition of “attractive” is subjective to each individual, it comes back to the fundamental rule - who are you targeting? If your target market is expatriates, it may be good to fully or partially furnish your home and provide the necessary furniture and fittings such as the air conditioner, fridge, washing machine, gas stove set and perhaps, even a microwave.

However, as mentioned above, if you are targeting families, it is best not to furnish your home to allow flexibility. “Not all dresses will look good on everyone, so make sure you dress up your home based on your targeted tenants' preference", says Tang.

3. Don't procrastinate: Help-and-do-it-yourself
The cliché of "good things do not just fall from the sky" also means you must not procrastinate in looking for the right tenant. Tenants do not come right knocking on your door, instead you have to look for them. There are a few ways to help yourself to reach out to the mass market and ultimately, your targeted tenants.

The most popular and cheapest way is to advertise via the internet, says Tang. Home owners can register themselves in various property websites (those offering free membership registrations) to post their properties for rent, while some of them use Facebook and Twitter to spread the word of mouth through friends. However, Tang comments that this method is used mostly by the younger home owners who are more internet savvy.

If you happen to own a property near a university/college, one option would be to post notices around either the university/college or within popular student hang-outs, upon approval. In targeting expatriates, Tang suggests you could advertise in their (e.g. Japanese) community newspapers.

4. Appointing a real estate agent- pros & cons
If you have done all the above and still to no avail, you now have to seriously think of engaging a real estate agent to assist you. This is practical especially for those who cannot afford the time.

To engage an agent will also mean passing on the unnecessary burden, inconvenience and risk of being robbed. Also, you don't have to entertain calls at odd hours of the day from potential tenants to view your home. By having an agent, these hassles can be avoided while you carry on with your day-to-day routine.

For first-time home owners, the experienced agents can guide them on tenancy agreement issues and appropriate market rental rates. Tang says a good agent will not ask you to lower your asking rent right away unless it is really above market rates.

Having said that, Tang advises that it is better to appoint a principal agent in marketing your home rental (specify deadline) as this will give the agent a sense of responsibility for quick rental. One obvious downside is how fast you rent out your property will very much depend on the agent's marketing skills.

The tricky part is when agents are not the genuine ones, the so-called "part-time coffee shop agents". There are cases, though minimal, whereby these agents abscond with the initial deposit paid by tenants. One way to reduce the risk, as Tang says, is finding out the license number, commonly known as E-number (issued by the Board of Valuers, Appraisers and Estate Agents Malaysia) of the agent you are dealing with. For some agents who are employed by the licensed real estate agencies, but without the E-numbers, you are advised to do some background check on them first.

5. Your “golden rule” to undercut competition
It is always advisable to do your homework and market research thoroughly to assess the appropriate asking rents based on what you can offer to tenants. But, what if you have not had any potential tenant after sitting on a fence of tight cash flow budget for several months?

As the last resort, Tang says he will use the golden rule - to undercut competition. With a minimum asking rent in mind, you are mentally prepared to accept a much lower rent. Though this may be your last weapon, it may prove to be one of the fastest ways to lure your tenant within the shortest period of time. Don't believe? Try it!

http://starproperty.my/PropertyGuide/Gadgets/394/0/0

Feb 1, 2010

Ask Azizi: Rental rate dilemma

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Dear Azizi Ali,

I am a little overwhelmed after reading some of your books including Millionaire Landlord. However, I’m now really interested to venture into the property business and have done my homework. I still have one question, though.

I'm living in Penang and want to purchase an apartment that is more than 10 years old. I intend to rent it out but am not sure how much I should charge the tenant. Let’s say the monthly rent 10 years ago is RM500 and the current rate is around RM900. How much should I charge knowing that the other landlords are probably charging the old rate?

Your advice is much appreciated. Thank you.

Willi Thae
Pulau Pinang

Dear Willi,

First, it is normal to feel overwhelmed when you learn something new. There appears to be so many new things to learn and master. However, if you keep at it, you should be able to handle most, if not all, of the new knowledge. In time, everything will fall into place.

Seeing that you are new to this, I must add that you need to educate yourself further. Apart from referring to the books you have read, you should also attend talks and seminars or talk to people who are already successful property investors. The more knowledge you gain, the higher your chances are of making it big.

In answer to your question, I understand that there are tenants still paying RM500 despite the current rental rate of RM900. This could be because they have been there for many years and the landlord did not raise the rent.

All properties should reflect their current rental rate. This usually means a higher rate as the years go by. If the rate doesn’t increase, something is not right with (a) the property, (b) the landlord or (c) both!

So you should charge the current rental rate of RM900 per month. In fact, the other landlords should also charge the current rate (plus or minus a few ringgit). It makes no economic sense for a landlord to charge a rate that is 10 or 20 years old. How is he going to make money? And if he is losing money, why did he buy the property in the first place?

If you think it will be difficult to get RM900 for the unit, my advice is to not buy the apartment! Look for another one that will enable you to charge its current rental rate. There are plenty of properties in Malaysia. Surely you can find one that will help you build wealth.

http://starproperty.my/PropertyGuide/Finance/2063/0/0