SRS Withdrawals: Taxable or Not in Singapore

The Supplementary Retirement Scheme (SRS) is a voluntary savings program in Singapore designed to encourage individuals to save for retirement while enjoying tax benefits. However, when it comes to withdrawals from the SRS account, it is essential to understand the tax implications. This guide provides a comprehensive explanation of when SRS withdrawals are taxable or not, based on the guidelines from the Inland Revenue Authority of Singapore (IRAS).

What is the Supplementary Retirement Scheme (SRS)?

The SRS is a voluntary savings scheme that allows individuals to save for retirement while reducing their taxable income during their working years. Contributions to the SRS account are tax-deductible, and withdrawals are subject to specific tax treatments depending on the timing and nature of the withdrawal.

Are SRS Withdrawals Taxable in Singapore?

The taxability of SRS withdrawals depends on the following factors:

1. Withdrawals Made After the Statutory Retirement Age
   • Withdrawals made after the statutory retirement age that was prevailing when the first SRS contribution was made are 50% taxable.
   • These withdrawals are taxed at the individual’s personal income tax rate.
2. Withdrawals Made Before the Statutory Retirement Age
   • Early withdrawals (before reaching the statutory retirement age) are 100% taxable.
   • A 5% penalty is also imposed on the withdrawal amount, in addition to the income tax liability.
3. Withdrawals Due to Medical Grounds
   • Withdrawals made due to medical conditions such as terminal illness, mental disorder, or permanent incapacity are 50% taxable.
   • The 5% penalty is waived for these withdrawals.
4. Withdrawals by Non-Citizens or Non-Permanent Residents
   • For non-Singapore citizens or non-permanent residents leaving Singapore permanently, withdrawals are 100% taxable. However, the 5% penalty is waived if the withdrawal occurs at least 10 years after the first SRS contribution.
5. Withdrawals Made Upon Death
   • In the event of the account holder’s death, the SRS balance is withdrawn as a lump sum and is 100% taxable. However, the 5% penalty is waived.

Tax Rates Applicable to SRS Withdrawals

1. 50% Taxable Withdrawals:
   • Only half the withdrawal amount is subject to tax.
   • This applies to withdrawals after the statutory retirement age or due to qualifying medical conditions.
2. 100% Taxable Withdrawals:
   • The full withdrawal amount is subject to tax.
   • This applies to early withdrawals, withdrawals by non-residents leaving Singapore, and withdrawals upon death.

Examples of Taxable and Non-Taxable Scenarios

Scenario 1: 50% Taxable Withdrawal

• An individual withdraws $20,000 from their SRS account after reaching the statutory retirement age. Only $10,000 (50%) is subject to tax at their personal income tax rate.

Scenario 2: 100% Taxable Withdrawal with Penalty

• An individual withdraws $15,000 from their SRS account at age 50. The entire $15,000 is taxable, and an additional 5% penalty ($750) applies.

Scenario 3: Withdrawal Due to Medical Grounds

• A terminally ill individual withdraws $30,000 from their SRS account. Only $15,000 (50%) is taxable, and the 5% penalty is waived.

How to Report SRS Withdrawals to IRAS

1. Declare Taxable Withdrawals:
   • Include the taxable portion of your SRS withdrawal in your annual income tax return under the relevant section.
2. Monitor Contributions and Withdrawals:
   • Keep track of your SRS account balance, contributions, and withdrawals for accurate tax reporting.
3. Provide Supporting Documents:
   • For withdrawals due to medical grounds or permanent departure from Singapore, submit the necessary documentation to IRAS.

Key Considerations for SRS Withdrawals

1. Timing of Withdrawals:
   • Plan withdrawals after reaching the statutory retirement age to benefit from the 50% taxable rule.
2. Residency Status:
   • Non-residents leaving Singapore should consider the tax and penalty implications of withdrawals.
3. Proper Documentation:
   • Maintain records of medical certificates, departure details, and other relevant documents for tax compliance.

Common Mistakes to Avoid

1. Early Withdrawals Without Understanding Tax Implications:
   • Avoid unnecessary early withdrawals to minimize tax liability and penalties.
2. Neglecting to Declare Taxable Amounts:
   • Ensure all taxable portions of withdrawals are accurately reported.
3. Failing to Monitor Retirement Age Changes:
   • Keep track of the statutory retirement age prevailing when your first SRS contribution was made.

How Apexia Corporate Advisory Can Help

At Apexia Corporate Advisory, we provide professional advice to help you navigate the tax implications of SRS withdrawals. Our services include:

1. Tax Planning for SRS Withdrawals
   • Advise on optimal timing and amounts for withdrawals to minimize tax liabilities.
2. Tax Filing Assistance
   • Ensure accurate reporting of taxable portions in your income tax return.
3. Residency and Departure Advisory
   • Guide non-residents on SRS withdrawal tax implications before leaving Singapore.
4. Documentation Support
   • Assist in organizing and submitting necessary documents for medical or permanent departure withdrawals.

Conclusion

Understanding the tax implications of SRS withdrawals is essential for effective financial planning. While withdrawals made after the statutory retirement age enjoy favorable tax treatment, early withdrawals or those made under special circumstances may attract higher tax rates and penalties. For personalized advice and assistance with SRS tax matters, contact Apexia Corporate Advisory today.