Being a full time home tutor in Singapore, have you ever wondered,
“Do I need to pay tax?”
“What are the implications if I evade tax?”
“How do I pay tax?”
Being teachers, you provide home tuition to students. You earn based on how many students you have, most students pay by cash, and you won’t incur records like CPF contribution from which IRAS can track your income.
In fact, it seems like there’s no need for you to declare your income as a private tutor. (Or does it?)
Yet, the simple understanding is that of course, you have to declare your income.
In recent years, Singapore’s tax department has been stepping up its game. Asiaone reports that IRAS has tracked down more than $2.3 million in unpaid taxes from private tutors and tuition centre proprietors who under-declared their income.
Currently, IRAS is auditing 50 more tuition teachers.
Imagine receiving a letter IRAS that they found out you’ve been evading tax.
Scary isn’t it?
After reading this, do you still feel confident about getting away with under-declared tax? Probably not!
“All self-employed persons must report the income earned from their business operations as business income, not salary. The business income is part of the total personal income which is taxed at individual income tax rates.”
“So does being a private tutor pay tax differently from the rest?”
Nope. Paying tax is still same for everyone. It is only a matter of how much tax you need to pay.
So if you’re not providing home tuition or a private tutor, you still can read on!
Today, let me share with you more about tax declaration and tax payment as a tuition teacher. Let’s go down to the percentages and the procedures together.
Alright, so how do I pay my tax?
There are a few things you need to know about tax. (I will try to simply as much as possible.)
- How to calculate my tax.
- How to pay my tax.
How to calculate my tax.
This is the tricky part, and many Singaporeans struggle to understand this (home tutors too!). What is important is, you need to calculate your chargeable income. Finding out your chargeable income will let you know how much tax you will need to pay.
Basically, there’s a simple formula to it:
Chargeable Income = Total Income – Tax Reliefs
*Chargeable Income: How much income will be taxed.
*Total Income: How much you’re earning annually.
*Tax Reliefs: Remission of a proportion of income tax normally due on earned income. (Basically, if this number is high, you will pay lesser tax.)
This formula is pretty straight forward. (I’m sure all you tutors know simple formula, right? 😀)
What are Tax Reliefs and how do I qualify for them?
Let’s understand more about Tax Reliefs. (Since the more the merrier!)
There are many tax reliefs you might have, but I will only be explaining a few of them.
- Earned Income Relief: Earned Income Relief is for individuals who are gainfully employed or carrying on a trade, business, profession or vocation. Read more here.
- Handicapped Brother/Sister Relief: Given to recognize individuals supporting their handicapped siblings and siblings-in-law. Read more here.
- CPF Cash Top-up Relief: Claim tax relief for topping up your own CPF Special/Retirement Account or those of your family members to meet basic retirement needs. Read more here.
- Life Insurance Relief: Claim for annual insurance premiums paid on life insurance policies bought on your life and the life of your wife. Read more here.
- Parent Relief / Handicapped Parent Relief: Parent Relief / Handicapped Parent Relief is given to promote filial piety and recognise individuals who are supporting their parents, grandparents, parents-in-law or grandparents-in-law in Singapore. Read more here.
There are many more tax reliefs you can tap onto. Here is the full list of tax reliefs from IRAS.
Okay, I got it, but how much tax do I need to pay?
Remember about Chargeable Income?
Chargeable Income = Total Income – Tax Reliefs
Once you calculated your chargeable income, you can identify which tier of chargeable income you belong to.
To understand how to calculate your payable tax amount is, I did up a neat infographic for you. Once you calculated your figure, that is the amount of tax you will need to pay.
There is one last thing I would like to touch on. There are Tax Rebates which will further decrease your amount of payable tax.
What are Tax Rebates?
Tax rebate is the amount that will be subtracted from your payable tax. Thus you pay lesser tax.
There is only 1 tax rebate available:
- Parenthood Tax Rebate (PTR): The most common tax rebate. Married, divorced or widowed parents may claim tax rebates of up to $20,000 per child. Read more here.
This amount is tagged onto your tax account and would be used to deduct your payable tax annually until it is depleted.
What is mean is, let’s say after calculations, your taxable income is $3,500. This amount will be deducted from your PTR (assuming you only have 1 child, which gives you a total of $20,000). Therefore you will pay $0 tax this year.
The remaining amount of $16,500 will still be left and could be used to deducts next’s year payable tax. To understand better, refer to the examples in the infographic.
Being a tutor used to mean laxed tax administration, but gone are those days. Since IRAS is tightening their checks, be ready to step up to their expectations and avoid a tea session with their officers. I hope this article has been helpful for your tax-paying endeavours, till next time!