Singapore’s Budget 2012: How It’s Going to Affect You


Ryan Ong



The budget speech for 2012 has been made, and the government’s laid out some radical changes. For the most part, the budget isn’t aimed at dealing with current “cyclical” issues, like the slump in manufacturing. The emphasis is on long term development, which lies beyond the existing setbacks. That’s a bit like deciding to build an ark when the the flood water’s up to your eyeballs. Still, these 5 changes are likely to have a positive impact:


Singapore’s new budget is set to do the following:

  • Introduce GST Vouchers
  • Provide Special Employment Credit for employers
  • Implement a Silver Housing Bonus
  • Reduce dependence on foreign workers
  • Increase aid to SMEs

Note that this is a tiny part of the entire budget, which encompasses a huge set of changes. I’d type them all here, except I don’t want you to go blind after 5 hours in front of your smartphone. As such, I’ve covered the points that, in my opinion, are of immediate impact to MoneySmart readers.


1. Introduce GST Vouchers


Auntie selling tissue
If I crack a joke about this, you’d be as inclined to laugh as she is.


GST vouchers are a new (and permanent) addition to help low income Singaporeans. Remember the GST offset package? The one that you blew on a Playstation and a week long Burger King binge? Yeah, the GST vouchers are replacing it.

The GST vouchers are based on the annual value (AV) of property and income level. The voucher is broken into three components:

  • Cash
  • Medisave Top-Up
  • U-Save (Nice name. Sounds like a cheap massage device.)



This is straight up cash, for anyone earning $24,000 per annum or less.

If the recipient:

Lives in a HDB Flat – They get $250

Lives on private property with an AV of $20,000 or under – They get $100


Medisave Top-Up

The Medisave Top-Up is dependent on age and the property AV:



This only pertains to HDB owners. U-Save is used to offset utility bills. The amount depends on the size of the flat:



Most young working adults are above the $24,000 per annum mark. The GST vouchers are likely to affect them indirectly; it might make care for elderly parents easier, which will be a vital concern within the next decade.

Younger low income Singaporeans will feel relief too…comparable to taking a Panadol after being shot in the head. The savings from GST vouchers are not sufficient for reasonable investment. Stay ambitious and keep looking for better opportunities.


2. Provide Special Employment Credit for Employers


Elderly manager in the office
“Kids, I’d like to introduce an old school concept called work.”


The Special Employment Credit (SEC) is set to affect the job market:

For employees over 50 and earning $3000+ a month, the employer gets 8% of the employee’s income from the government.

For disabled employees, the SEC is doubled to 16%.

This seems to be a call to the service sector: Hire elderly Singaporeans instead of foreign workers.

For large corporations, the SEC is trivial; their main advantage in hiring the elderly or disabled remains a show of corporate responsibility. SMEs however, might find it relevant to their payroll.

(PS: Run a family business? Let’s see if retired dad wants to be the new manager…)


3. Implement a Silver Housing Bonus


HDB flats all lit up and looking the same
“Also, the neighbours have 7 cats and play mah jong till 2 am. So sad to leave. K thx bai!”


Senior citizens will benefit from a range of schemes, such as the SEC and increased CPF (if you consider that a benefit). But chief amongst this is the Silver Housing Bonus.

The Silver Housing Bonus is $20,000, awarded to senior citizens who sell their flats and purchase a 3-room or smaller flat. The government will provide $15,000 in cash, and the other $5000 will go into the seller’s CPF. The proceeds of the sale are also used to top-up the seller’s CPF, and any amount above the minimum sum (MS) can be withdrawn in cash.

Look for the impact of this move in the resale market, notorious for its focus on cash over valuation (COV). The Silver Housing Bonus is an enticement to sell; this could increase the availability of resale units, resulting in a decrease in the median COV. If you’re looking to buy a resale flat, you might want to wait until the effects start showing.


4. Reduce Dependence on Foreign Workers


Maid carry bag for NS Man
Clearly, we are reducing our dependence on foreign labour.


The Dependency Ration Ceiling (DRC) is used in manufacturing and services; it determines the maximum allowable percentage of foreign workers. The DRCs are being decreased as follows:

Manufacturing – From 65% to 60%

Services – From 50% to 45%

In addition to decreasing DRCs, the foreign worker levy is rising. However, this was part of measures introduced in 2010, and is not a consequence of the 2012 budget.

Most companies are well below the DRC, so it will only impact their future hiring decisions. We won’t be seeing crowds of foreigners at the airport any time soon. The government expects:

“…about 500 manufacturing companies and 8,500 services companies to be affected by the DRC changes.”

No names or source for the numbers, so we’ll have to take their word for it. Assuming it’s true, we should see marginal improvements in the job market over the next two to three years.

As part of the budget speech, it was also announced that better pay and working conditions in services and manufacturing would be encouraged. Also, that we would need a collective effort to re-instil pride in every job (e.g. cooks, construction workers, chambermaids, etc.)

I’m not sure how this could happen; the average Singaporean is raised to regard manual labour with contempt. Culturally, it’s the province of academic underachievers. We could stand outside the university and slap every brat that comes out with a sense of privilege, but that’s more entertaining than effective.

Singaporeans working in service or manufacturing can look forward to raises or increased privileges, and probably a host of reality TV shows that feature them.


5. Increase Aid to SMEs


Company sitting around a floor
Innovation = A kind of elevated surface, supported by four legs.


SMEs are getting a one-off cash grant this year. This is to cope with the expected slowdown in business.

Companies will get a grant based on 5% of their revenue in year end 2012, which is capped at $5000. The grant requires them to have made CPF contributions to at least one employee, who is not a shareholder.

In addition to the grant, the PIC (Productivity & Innovation Credit) has been polished. The PIC scheme can now provide a $60,000 payout, for companies to upgrade staff or attempt innovative projects. This is double the previous amount. In addition, the grant is paid quarterly instead of at year end.

The grant will cheer local entrepreneurs and start-ups. It won’t pay rent, but at least the prototypes and office equipment will be paid off. Their employees can’t count on a raise, but they are looking at a few extra months of stability.

The PIC removes one of the drawbacks of working in a start-up; usually it’s big companies that subsidise training. If you currently work for a SME, bring this up to your boss. You might get yourself a free upgrade.

Image Credits:
fletchy182hslo, whyohgee, Thant Zin Myint, Stomp, whyohgee (last picture), mulberry leaves

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.