How Will Singapore Budget 2023 Impact Your Personal Finances?

If he writes an 85-page long love letter on how he’s going to build a better future for you, he might not be your lover. He’s probably Deputy Prime Minister and Finance Minister Lawrence Wong.

On Valentines’ Day (14 Feb) this year, the Singapore government dropped us a thoughtful gift—Mr Wong delivered the much-awaited Singapore Budget 2023 speech. The theme this year is “Moving Forward in a New Era”, which focuses on “building our capabilities and seizing new opportunities in a new era of global development”.

In a nutshell, the government intends to spend about S$104.2 billion in the coming year, with much of this spending aimed at growing the economy and targeting immediate cost-of-living pressures.

So, was this Valentines’ Day gift a true love letter for Singaporeans? Here are some of the highlights from the budget and how we think it’ll affect your personal finances.

1) Larger handouts to deal with inflation and the rising cost of living

Singaporeans have complained about the cost of living since time immemorial. (Hey, it’s not our fault we can’t just move to a cheaper city!) With inflation going through the roof this year and the GST hikes rubbing more salt into the wound, the question on everyone’s lips has been: What is the government going to do to help us cope? Some initiatives include:

a) Cost-of-Living (COL) Special Payment

The government is giving out a one-time “cost-of-living special payment” to eligible Singaporeans aged 21 and above with an annual assessable income below S$100,000 and who do not own more than one property.

Payouts range from S$200 to S$400, depending on income, and will be disbursed in June to around 2.5 million adult Singaporeans.

b) Community Development Council (CDC) vouchers

All Singaporean households will receive another S$300 in CDC vouchers in January 2024.

c) Higher GST Voucher cash payouts

Those residing in homes with an annual value of S$13,000 and below will receive a higher GST Voucher cash quantum thanks to an increase from S$500 to S$700 this year, and a rise to S$850 from 2024.

Those residing in homes with an annual value of S$13,000 to S$21,000 will enjoy a rise in cash payouts from S$250 to S$350 this year, and a rise to S$450 from 2024.

d) Assurance Package

About 2.9 million adult Singaporeans will receive a total of between S$700 and S$2,250 over the five years of the package. This is up to S$650 more than what the government previously announced.

What does this mean for you? The way the government has been talking about the cash payouts, it may sound like Christmas is coming early. Free money is nice, but you shouldn’t see these payouts as something to rely on. They can help alleviate stress, albeit temporarily. If the money comes at a time when you don’t need to use it urgently to offset some payment or other, consider how you can grow it instead, such as by putting it in government securities (e.g. T-bills) and so on.

 

2) More support for couples looking to start or expand their families

The low birth rate shows no signs of ever reversing its steady decline. Nonetheless, the government has rolled out a raft of support to prevent it from reaching zero, and to offer support to existing parents. These include:

a) Baby Bonus to increase by S$3,000

The Baby Bonus Cash Gift will be increased by S$3,000. This brings the cash payout for the first and second child in a family to S$11,000, up from S$8,000. The cash payout from the third child onwards will go up from S$10,000 to S$13,000.

The payment schedule has also been adjusted to help parents receive continuous support all the way until their child enters primary school.

Previously, the cash is paid out by the Government in five instalments over 1-and-a-half years from the birth of a child. Now, parents will receive S$9,000 in payouts during the first 1-and-a-half years of their child’s life. They will then receive S$400 every six months from when the child is aged 2, until the child turns 6-and-a-half years old.

b) Paternity leave doubled to 4 weeks

Dads, there’s no more excuse for not mastering the finer points of diaper changing and household chores. Government-paid paternity leave will be increased from 2 weeks to 4 weeks. This doesn’t include any paternity leave your company might wish to offer privately, so don’t forget to ask.

c) Unpaid infant care leave doubled to 12 days

Parents of Singapore citizens will now be able to take up to 12 days of unpaid infant care leave per year, an increase from the previous allowance of 6 days. On the downside, it’s unpaid, so it’s not much of a consolation for those who can’t afford to not get paid. If that’s the case for you, check if your employer offers paid infant care leave.

d) Working Mother Child Relief (WMCR) to be changed to fixed dollar relief

WMCR used to be doled out as a percentage of the mother’s earned income, which meant that mothers who earned less would receive less. WMCR relief will now be changed to a fixed payout of S$8,000 for the first child, S$10,000 for the second child and S$12,000 for the third child and beyond.

What does this mean for you? If you’ve been putting off expanding your family due to finances, you can look forward to a bit more support from the government. But bear in mind that the payouts, while more generous than before, are still quite minuscule compared to the true cost of raising a child in the long term, particularly in light of the rising costs of things such as food, childcare and education. Also, while WMCR has been adjusted to better support middle to lower-income families, it is ultimately still a policy that encourages married women to remain in the workforce after having children. That could translate to higher costs including childcare and hiring a domestic worker. Disappointingly, single, unwed mums are still not eligible for WMCR.

 

3) CPF monthly salary ceiling to be raised

The CPF monthly salary ceiling will be raised in stages from the current S$6,000 to S$8,000 by 2026. This change will affect employees who earn over S$6,000 per month.

The CPF salary ceiling limits the amount of our salary that attracts CPF contributions. In other words, if you earn more than $6,000, you’ll now have to make CPF employee’s contributions on a larger portion of your salary. You’ll also get employer’s contributions on this portion.

What does this mean for you? For those who earn more than S$6,000, the total amount of money you’ll receive through your job will now be higher when you add up your take-home pay and CPF contributions, since employer’s contributions are made in addition to your salary. However, you’ll have to deal with having a lower take-home pay since the total CPF contributions you must make now cover a larger tranche of your salary. In other words, you’re going to have less disposable income and will need to live on a tighter budget. Make sure you review your budget allocations, as well as your savings and investments, to adjust to the changes. The long term effects of this policy are yet to be seen, and could result in employers paying lower increments and salaries in order to offset the higher employer’s CPF contributions. So, be aware and keep an eye on your finances over the coming years.

ALSO READ: How will Budget 2023 affect your CPF contributions? CPF Contribution Rates, Ceilings, Retirement Sum and more

 

4) More assistance for people buying resale flats and BTOs

The government has made a few changes to encourage more people to buy resale flats, ostensibly to ease demand for BTO flats, as well as to boost the BTO chances of a select group of people, ie. those who could potentially boost the fertility rate. For instance:

a) Housing grants for first-timer families buying resale flats to be increased by up to S$30,000

First-timer families buying a 2- to 4-room resale flat can get a maximum CPF Housing Grant of S$80,000, up from the previous S$50,000. Meanwhile, those buying a 5-room or larger flat can get up to S$50,000, up from the previous S$40,000.

b) BTO balloting to be adjusted to help specific groups

Getting allocated a BTO flat in a decent area can seem harder than striking Toto. The HDB will now give an extra ballot chance to certain groups of first-timers, namely families with children and married couples aged below 40.

Before the changes kick in, first-timers have been receiving 2 ballot chances while second-timers get just 1. The new sub-category of first-timers consisting of families with children and married couples aged 40 and below will thus have 3 ballot chances.

What does this mean for you? Some prospective property buyers might wish to shift their focus to the HDB resale market instead. For instance, if you’re a second-time BTO applicant, it might be more worthwhile to just go for a resale flat and claim the higher CPF Housing Grant instead of try to ballot for a flat, since you’ll be at a greater disadvantage now. The longer-term effects of the policy changes are as yet unknown. They could balance out demand for BTO and resale flats, but might also end up driving up resale demand and sending prices soaring.

 

5) Higher taxes and fees for luxury houses and cars

No surprises, the government needs to fill its coffers after giving out all these payouts. To do so, taxes and fees for luxury houses and cars will be raised.

a) Revised ARF rates

The Additional Registration Fee (ARF) is imposed when a vehicle is registered. It is calculated based on a percentage of the vehicle’s Open Market Value (OMV). In other words, the more expensive the car, the higher the ARF.

The top tier of the ARF, which affects vehicles with an OMV of more than S$80,000, will be revised to 320%, up from the current 220%.

For vehicles with an OMV above S$40,000 and up to S$60,000, the ARF rates will be revised to 190%.

As for vehicles with an OMV above S$60,000 and up to S$80,000, the revised ARF rate will be 250%.

What does this mean for you? The ARF changes are expected to affect the top one-third of cars. To put things in perspective, the OMV of a Honda Civic 1.5 Turbo registered in 2023 is only about $26,000, while that of a Mini Countryman Cooper is about $41,000. As a result, the average car owner is probably not going to be affected. As for the ultra-rich in supercars, uh, this is small change.

How else do you think Singapore Budget 2023 will affect the way that you plan your finances? Share this article with your family, friends, and colleagues.