26 December 2024
Malaysia Tax Relief on Childcare and Elderly Care
In Malaysia’s rapidly evolving social and economic landscape, dual-income households have become the norm. Many employees juggle demanding careers with caregiving responsibilities for young children and elderly parents. This dual burden can lead to stress, absenteeism, and reduced productivity.
Malaysia's Budget 2025 introduces several measures to support families with childcare and elderly care responsibilities. Key provisions include:
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Child and Elderly Care Allowance
- Tax Relief: Individuals can claim up to RM3,000 per year for childcare and elderly care expenses, now extended to include care for parents and grandparents.
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Expanded Medical Reliefs for Families
- Increased Limit: The tax relief limit for medical expenses and treatments has been raised to RM6,000 (previously RM4,000), covering diagnostic tests, mental health consultations, and self-monitoring tools.
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Children with Learning Disabilities
- Relief increased to RM6,000 (previously RM4,000), covering diagnostic and rehabilitation expenses.
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Reliefs for Disabled Individuals and Their Families
- Increased limit to RM7,000 (up from RM6,000) for disabled taxpayers.
- Increased limit to RM6,000 (up from RM5,000) for taxpayers with a disabled spouse.
- Increased limit to RM8,000 (up from RM6,000) for taxpayers with a disabled, unmarried child.
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Expanded Reliefs for Sports and Elderly Care
- Sports Activities: Tax relief for sports equipment and activities, limited to RM1,000, will be expanded to include expenses for parents.
- Vaccination Costs: Tax relief for parents' full medical check-up expenses will be expanded to include vaccination costs.
- Medical Treatment for Grandparents: Expenses for medical treatment and special needs will now extend to grandparents.
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Tax Exemption on Childcare Allowance
- The individual income tax exemption of up to RM3,000 per year on childcare allowance received by employees or paid directly by employers to centers will be expanded to include elderly care for parents and grandparents.
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Employer Deductions for Childcare and Elderly Care Allowances
- Employers providing childcare allowances will also benefit from additional tax deductions, which now extend to care for the elderly, including parents and grandparents.
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Employers can also benefit from implementing policies that align with tax relief provisions for childcare and elderly care. Here are some strategies:
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1. Establish Employer-Sponsored Childcare Facilities
- Setting up an in-house childcare center that is registered with the Department of Social Welfare (JKM) allows the company to claim tax deductions for operational expenses.
- Subsidize childcare costs for employees by collaborating with external registered childcare centers.
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2. Provide Medical Benefits for Elderly Dependents
- Include elderly care as part of the company’s employee benefits package. Medical expenses paid by the company for employees’ parents or grandparents may qualify for tax deductions.
- Work with insurance providers to offer group plans covering elderly dependents, reducing the financial burden on employees while enhancing corporate tax benefits.
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3. Offer Dependent Care Allowances
- Provide allowances for childcare or elderly care as part of the employees’ compensation package. Ensure that these benefits comply with tax regulations to enable both employees and the company to claim reliefs.
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4. Maintain Proper Documentation
- Ensure all expenses related to childcare or elderly care are well-documented and comply with LHDN requirements. This includes receipts, payment records, and agreements with service providers.
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By implementing thoughtful policies and providing resources, education, and administrative support, you can create a supportive work environment that values and uplifts your employees while optimizing the company’s tax benefits.
For further clarification, refer to the official Inland Revenue Board of Malaysia (LHDN) or consult a tax professional.
Contact us to find out how WhyzeHR can be setup to allow employers to communicate policies to employees and to streamline documentation by allowing employees to upload related expenses.