SG Budget is a great snapshot into the initiatives that the government means to take this year. However, it is a lot of information to take in, and aside from the broad strokes (like that massive thing being built in Jurong), you might not know much.
Here’s the SG Budget 2016 broken down to what matters to you.
Challenges of Today & Future
Our Priorities in Meeting Future Challenges
Reserves, Past & Current
This is probably worth a mention, since the ruling People’s Action Party (PAP) is at its new term of government since winning big at GE2015. This is the new government’s first budget and there are certain important implications.
Did you know that the accumulated Current Reserves are transferred to Past Reserves at the end of each term of government? This means that if there are budget surpluses from the last term of government before GE2015, the money would be locked away in Past Reserves and the new government would have no access to it, unless authorised by the President.
The Singapore Constitution prevents every new term of Government from drawing on the accumulated fiscal surpluses of the previous term, thus limiting the room for large expenditure early on in a fresh term. Traditionally, the PAP has always been prudent in its crafting of the budget at every new term. Experts who have studied the 2002, 2007 and 2012 budgets – all at the start of a new term of government — observed a common broad thrust: Taking bold steps to position and steer the economy to greater heights, with an eye on generating revenue for future expenditure.
From Minister of Finance Heng Swee Keat’s budget speech on 24 March, Thursday, the same guiding principle can be observed too.
SME Corporate Income Tax (CIT) Rebate
Raised from 30% of tax payable to 50% of tax payable with a cap of $20,000 rebate each year for YAs 2016 and 2017.
Expected Expenditure: An additional $180 million over two years, bringing the total amount of support to close to a billion big Ds.
SME Working Capital Loan Scheme
For loans of up to $300,000 per SME, the government will co-share 50% of the default risk of such loans with participating financial institutions, to encourage lending to our SMEs.
Expected Expenditure in 2016: $2 billion over the next three years.
SME Mezzanine Growth Fund
MOF will match up to $25 million of new private sector investment on a 1:1 basis to provide more capital to support our SMEs to scale up and internationalise.
Expected Expenditure: from $100 million to $150 million
Business Grants Portal
Instead of going from agency to agency to enquire about grants, a new Business Grants Portal will be launched in the fourth quarter of this year.
This portal will give business owners a one-stop portal to understand the qualifications needed for each grant, and will start with grants from IE Singapore, SPRING, STB and Design Singapore and progressively include grants from other government agencies.
Mama shop owners
MND will enhance the Revitalisation of Shops package, to better support promotional activities and upgrading projects in HDB town centres and neighbourhood centres. SPRING will also work with the Federation of Merchants’ Associations and local merchant associations to strengthen their capabilities to support heartland businesses.
Entrepreneurs, People of the Future
More support from IE Singapore
In 2016, IE expects to help around 35,000 to 40,000 companies of all sizes to venture overseas from 34,000 in 2015.
Extension of Double Tax Deduction for Internationalisation scheme
Double Tax Deduction, which covers qualifying expenses such as overseas business development and investment study trips, extended till 31 March 2020.
Mergers and Acquisitions (M&A) Allowance
M&A allowance cap increased to $40 million of the value of the deal from $20 million. With the enhancement of the M&A allowance to 25% of the value of the deal as announced in Budget 2015, companies can now enjoy up to $10 million of M&A tax allowances per YA.
Non-taxation of companies’ gains on disposal of their equity investments, based on existing scheme parameters, to be extended until 31 May 2022.
National Trade Platform
One-stop trade information management system that will provide electronic data sharing amongst business and government agencies. This will eventually replace the current TradeNet and TradeXchange systems, and help cut costs and streamline processes.
It will also work as an open innovation platform to help other service providers with the big data needed to develop value-added services and apps, with the potential to bring over $600 million worth of man-hour savings each year.
Expected Expenditure: $100 million
The government will set aside $300 million for the Food Manufacturing sector over the next five years. This includes support to firms and TACs, as well as initiatives such as specialised industrial infrastructure.
Expected Expenditure: $300 million
New initiative SG-Innovate will match budding entrepreneurs with mentors, introduce them to venture capital firms, help them to access talent in research institutes, and open up new markets.
The SG-Innovate initiative will be uilding on initaives by Infocomm Investments Private Limited (IIPL), and with the support of SPRING and EDB, they will expand existing accelerator programmes to new and emerging sectors such as Smart Energy, Digital Manufacturing, Fintech, Digital Health, and Internet-of-Things.
Local Enterprise and Association Development (LEAD) PLUS
A Local Enterprise and Association Development-Plus (LEAD-Plus) programme will be introduced to encourage trade associations and chambers (TACs) to develop industry-wide solutions for common challenges.
The Government will also second up to 20 public officers from interested trade associations and chambers.
Expected Expenditure: S$30 million over the next five years
Singapore’s Tony Starks
Automation Support Package
If you have visions of your company becoming the next stark industries, the new Automation Support Package from SPRING will help companies scale up their automation projects.
The new Automation Support Package from SPRING will comprise four components:
- A grant to support the roll-out or scaling up of automation projects, funding projects at up to 50% of project cost, with a maximum grant of $1 million.
- A new 100% Investment Allowance for automation equipment
- Government to enhance risk-share with participating financial institutions from 50% to 70% for such projects
- IE Singapore will work together with SPRING in relevant cases to help these businesses to access overseas markets.
Expected Expenditure: $400 million over next 3 years
National Robotics Programme
To drive robotics development and deployment across sectors like healthcare, construction, manufacturing, and logistics, the Government will provide support to the National Robotics Programme.
Expected Expenditure: $400 million over next 3 years
Research, Innovation and Enterprise (RIE) 2020 Plan
Of the commitment announced for the Research, Innovation and Enterprise (RIE) 2020 Plan, up to $4 billion will be directed to industry-research collaboration.
The RIE 2020 effort, will get a top-up of $1.5 billion to the National Research Fund this year. Of the S$19b committed to the 5-year plan for R&D initiatives in RIE2020, up to $4 billion will be dedicated to industry research collaboration.
Expected Expenditure: $1.5 billion
The Productivity and Innovation Credit (PIC) scheme will continue as it is important for companies to continue to seek more productive ways of doing things, and be more innovative in their business processes and product offering, etc. However, the cash payout rate under PIC will be lowered from the current 60% to 40% for expenditures incurred on or after 1 August 2016.
The 400% tax deductions under the scheme will remain unchanged. The PIC scheme which has been extended for YA 2016 to YA 2018 will expire thereafter.
Increase Workfare Income Supplement (WIS) payouts
Eligible workers will receive higher WIS payouts. Payouts will vary depending on the workers’ age and income. For example, workers earning $1,000 to $1,600 a month will receive increases in payouts of $100 to $500. The qualifying income ceiling has also been raised from $1,900 to $2,000.
Workers will continue to receive 40% of WIS in cash and 60% in CPF.
People with Disabilities
The Workfare Training Support scheme will now be open to disabled workers who are under 35 to enable them to upgrade their skills through training.
Employers that hire disabled persons who earn up to $4,000 a month will continue to receive the Special Employment Credit (SEC) of up to 16% of the employee’s wages.
Fresh Start Housing Scheme
The Fresh Start Housing Scheme will provide a grant of up to $35,000 to help eligible families with young children to own a 2- room flat, with a shorter lease, which will be more affordable for them.
Families will need to demonstrate effort, for example, by staying employed and making sure their children attend school.
Special Employment Credit (SEC)
The SEC is aimed to provide employers with a wage offset for hiring workers aged 55 and above earning up to $4,000 a month. Employers with Singaporean workers aged 65 and above will continue to receive a wage offset of up to 8%, in addition to the wage offset of 3% for the re-employment of workers aged 65.
The SEC will be up to 5% for workers aged 60 to 64 and up to 3% for those aged 55 to 59.
Expected Expenditure: + $1.1 billion.
The Silver Support scheme, first announced by DPM Tharman during the last budget will see eligible seniors receiving between $300 to $750 every quarter, depending on their flat type. The scheme is specially crafted to help the bottom 20% to 30% Singaporean elderly.
First payout will take place in July this year, and it will be a double payout for two quarters – the two quarters of April to June 2016, and July to September 2016. The next two payouts will be made in end-September and end-December. Each one is a payout for the coming quarter. In subsequent years, payouts will be made in March, June, September and December. The CPF Board will notify eligible seniors before the first payout is made. There is no need for seniors to apply; this will happen automatically.
Expected Expenditure: $320 million
Community Networks for Seniors
These networks will comprise local stakeholders, such as Voluntary Welfare Organisations (VWOs), community volunteers, schools and businesses. At the core, the network will have a small team of full-time officers who will study the health and social needs of seniors and draw together stakeholders to provide coordinated support.
Under this pilot, Pioneer Generation (PG) Ambassadors will, through their outreach, encourage seniors to stay active and connect them to relevant support.
Increase in Public Assistance and Singapore Allowance
There will be an increase in public assistance through raising the basic monthly cash allowance. For example, a two-person household, where both are on public assistance, will now receive an additional $80 a month, bringing the amount of cash assistance per month to $870.
In addtion, the Government will increase the Singapore Allowance and monthly pension ceiling by $20 per month each – to $300 and $1,230 respectively. This will benefit about 10,000 pensioners.
PMETs (or PMEs)
Lifelong Learning Endowment Fund
Minister Heng announced that the Ministry expects to more than double the current outreach for PMETs from 2,000 to over 4,000.
The Ministry of Manpower (MOM) will commit an additional $35 million a year from the Lifelong Learning Endowment Fund and Skills Development Fund to support these initiatives.
TechSkills Accelerator, a new skills development and job placement hub for the ICT sector, will be launched. Major IT employers and associations including SiTF, SCS and ITMA30 will partner IDA in this effort.
The estimated spending on SkillsFuture and related initiatives will average over $1 billion per year till 2020 from 2015.
Expected Expenditure: $1 billion per year till 2020 from 2015
There will also be a new initiative, called KidSTART, for children in their first six years. There is extensive research which shows that experiences in the early years of a child’s life significantly influence his or her physical, cognitive, and social development.
About 1,000 children are expected to benefit. This pilot is expected to cost more than $20 million. The Minister for Social and Family Development (MSF) will elaborate on this at Committee of Supply (COS).
National Outdoor Adventure Education Masterplan
As part of this effort, a new Outward Bound Singapore (OBS) campus will be built on Coney Island
The OBS campus on Coney Island is expected to be ready around 2020, and cost about $250 million.
Child Development Account (CDA)
Parents will automatically receive $3,000 in their child’s CDA, which they can use for their children’s healthcare and childcare needs.
Parents who save more will continue to receive dollar-for-dollar matching from the Government, up to the co-savings cap. For example, if they put $3,000 into their first or second child’s CDA, they will receive an additional $3,000 in matching grants, bringing the total Government CDA grant to $6,000, for a total of $9,000 in the account.
Changi Airport Terminal 5
The Ministry also commits a further $1 billion top-up to the Changi Airport Development Fund to support this effort.
Medisave Withdrawal Limit increased
The Ministry will double the Medisave withdrawal limit for pre-delivery medical expenses, from $450 to $900, with immediate effect.
GST voucher (GSTV)
One-off GST Voucher (GSTV) – Cash Special Payment
To support households amid current economic conditions, we will provide a one-off GST Voucher – Cash Special Payment of up to $200 for eligible GST Voucher – Cash recipients.
In total, eligible households can receive up to $500 in GSTV – Cash in 2016. (See Table 4.)
The one-off GSTV – Cash special payment will cost an additional $280 million in 2016 and benefit 1.4 million Singaporeans.
Service & Conservancy Charges
There will be one to three months of Service & Conservancy Charges (S&CC) rebates for HDB-owners. One- and 2-room HDB households will receive a total of three months of rebates for this year, while 3- and 4-room households will receive two months of rebates.
Personal Income Tax Relief Cap
A cap on the total amount of personal income tax relief an individual can claim, at $80,000 per Year of Assessment, will be introduced. At this threshold, 99% of tax-resident individuals will not be affected. Many can still continue to enjoy reliefs. For instance, among those currently claiming the Working Mother’s Child Relief, 9 out of 10 are expected to continue to claim it fully, without being affected by this cap.
This cap will make our personal income tax system more progressive. Nevertheless, our personal income tax burden remains low. Our personal income tax structure must allow us to continue to stay competitive.
The personal income tax relief cap will take effect from YA 2018 and is expected to raise an additional $100 million a year.
MOF has published a very easy-to-read Budget-in-brief here.