Budget 2009: What It Means For You?

As always, there were bundles of expectations on Malaysia's Budget 2009 which was released last Friday evening. As it turned out, it was a budget for the people in general and the measures were meant to contain inflation and accelerate economic growth. So, what is in store for you as an individual living in Malaysia? Here are some quick key takeaways of the goodies for individuals in general:

1. reduction in personal income tax rate from 28% to 27% for top tax bracket and from 13% to 12% for middle income groups with tax bracket at RM35,000-50,000;
2. increase in tax rebate from RM350 to RM400 per person for those with
taxable income of RM35,000 and below;
3. the eligibility criteria of monthly household income for welfare assistance is
raised to RM720/month from RM400/month;
4. all interest income from savings for individuals will be tax-exempted;
5. childcare allowances of up to RM2,400 per year for employees will be
exempted from tax;
6. travel allowances of up to RM2,400 per year for employees will be exempted from tax;
7. Household with monthly electricity bill of RM20 or less to be exempted from payment from 1st Oct 2008 to end 2009;
8. Fifty percent (50%) exemption on stamp duty for loan agreements for real estate properties valued below RM250,000 (USD75k). Current stamp duty rate is o.5%. This actually translates to a maximum savings of only RM625! Question is, will this be good enough to spur the medium to low cost property market?

Perhaps the only benefit from an investor's standpoint, is the long awaited change on the tax structure for Malaysia Real Estate Investment Trusts (REITs) - tax rate on dividend received by individuals will be reduced from 15% to 10%. For foreign institutional investors, tax rates on dividend received will be reduced from 20% to 10%. These measures will enhance the competitiveness of Malaysia REITs vis a vis regional countries such as Singapore and Hong Kong. However, do not celebrate too soon, as Malaysia still has a lot to do to boost its overall size and attractiveness of REITs. Cutting taxes is only one of the many incentives needed.

So, are these budget measures good enough for you? What do you think?

For the complete list of budget measures, please click this link.