Tax Computation for Benson and Sarah Tan A Case Study for YA 2025

Learning Objective:

• Understanding of tax residence rules and the application of the rules
• Reading and comprehending information provided to prepare a tax computation for tax resident individuals in accordance with tax rules and concessions
• Maximizing deductions of expenses, personal reliefs, etc available to individuals.

[All amounts provided in the information are in Singapore dollars)

Benson Tan is a 53-year-old Singaporean. He has been working for Power Precision Ine (“PP”), a company tax resident in Country E and which is also listed on the Stock Exchange in Country E. Benson and his family would come back to Singapore every year to celebrate important occasions (e.g. birthdays and festive celebrations) with his parents. Benson accepted the position of managing director at the Singapore subsidiary of PPI, Power Precision (Singapore) Pte Ltd (“PPS”), when the position became vacant in 2023. Benson decided to move back to Singapore in view of his eldest son’s impending National Service enlistment in August 2024 as well as be closer to his aging parents. He relocated back to Singapore on 15 July 2023 to commence his employment with PPS on 1 August 2023 while his wife and his two younger children, 14-year-old twins Olivia and Octavia, arrived in Singapore on 5 July 2024 after the completion of the twin’s school year. His 17-year-old eldest son, Brandon, remained in Country E to complete his GCSE A’ Levels in April 2024. Brandon will return to Singapore thereafter. He is married to Sarah, a citizen of Country E who has never lived in Singapore apart from short visits and who does not hold Permanent Resident status in Singapore. Their 3 children are Singapore citizens although they were born in Country E. Benson’s Singapore employment package comprise of the following:

a. Monthly salary of $30,000.

b. Monthly entertainment allowance of $1,200 which Benson utilized to cover the following expenses incurred in year 2024:
i. Gifts worth $1.300 given to his secretary and administrative assistant to show his appreciation of their support;
ii. Expenses of $8,500 incurred on contract negotiations with current and potential customers and suppliers; and
Expenses of $3,200 on social gatherings with customers and suppliers.

c. Benson received an upfront bonus of $30,000 on 15 August 2023 which he will have to refund part thereof if he does not complete a full employment year with PPS, commencing from 1 August 2023. Upon completion of the first full employment year with PPS, he will receive an additional bonus of $70,000.

d. As Benson is required to attend virtual meetings and calls with personnel from PPI and group companies at odd hours from home due to different time zones, he is provided with a monthly telecommunication allowance of $500 to cover extra expenses incurred under this work arrangement. In this regard, he incurred expenses on the following:
i. Benson signed up for fibre broadband for his sole use at home for business purposes. The monthly subscription fee is $80/month commencing 1 September 2023.
ii. In 2024, Benson purchased a printer cum scanner for his sole use at home for business purposes. The printer costs $350, and he incurred a further $150 for ink cartridges

e. Benson was provided with a car for his use by his employer effective from 1 March 2024. The car costs $220,000 (not inclusive of COE of $80,000) and has a PARF value of $60,000. The insurance, road tax and maintenance expenses for the car is paid for by PPS and totalled $15,000 for the period from 1 March to 31 December 2024. The daily running expenses will be borne by Benson (see (f) below).

f. Monthly transport allowance of $1,500 which Benson used to cover the following expenses for the year 2024:
i. taxi fares of $1,800 for daily commute to work before he had access to the company car,
ii. taxi fares of $1,500 for trips from business entertainment venues to home; and
iii. daily car running expenses totalling $9,000 for business-related trips using the company car provided

g. Benson rented a fully furnished house (with an annual value of $60,000) from 1 August 2023 to 30 June 2025. The monthly rental of $8,000 is fully borne by the company.

h. In 2024, PPS reimbursed medical expenses of $5,400 for Benson and his family under the company’s medical and hospitalization scheme.

i. The company paid for the following overseas trips during the year 2024:
i. Air tickets costing $13,000 to various countries for Benson to attend business meetings and conferences.
ii. Air tickets costing $8.000 for Benson’s family to join him on some of his business trips.

j. Benson and his employer make CPF contributions within statutory limits.
In addition, to the income information given above, Benson also received the following benefits/income and incurred the expenses given below for the year ended 31 December 2024

k. i. Singapore one-tier dividend of $4,500.
ii. Interest income of $1,900 from HSBC Bank, an approved bank in Singapore.
iii. Interest income of $600 from a loan to ST Pte Ltd, a company tax resident in Singapore.
iv. Benson remitted savings of $100,000 back to Singapore on 5 July 2024. The savings were from his salary earned while working in Country E.
v. Benson owns an apartment which has always been rented out. His tenant moved out on 30 November 2024. For the year ended 31 December 2024, the income and expenses from the apartment are as follows:

• Gross monthly rental: $8,000
• Fire insurance and property tax (annual): $9,000
• Monthly maintenance fee: $1,000
• Replacement of air-conditioners in January 2024: $ 15,100
• Mortgage repayment (monthly): $3,000 (comprising capital repayment of $2,000 and interest of $1,000)
• Cleaning expenses of $4,000 incurred in December 2024.

Benson does not intend to continue to rent out the property. Renovations commenced after the tenant moved out as the family will be moving in thereafter.
Benson’s wife, Sarah, derived the following income in the year ended 31 December 2024:

l. Sarah commenced work as a music teacher with the Renaissance Music Academy, starting from 1 August 2024 and her monthly salary is $5,000.

m. Sarah has rental income from an apartment she owns in River Valley Road, Singapore. The apartinent derived a net rental loss of $2,000 after deductible expenses.

n. Sarah earned interest income of AUD 5,000 (SGD 6,000) in 2024 from her deposit placement with ANZ Bank, Melbourne Australia. The interest was remitted to Singapore on 3/1/2025.
Other information:

o. Benson and his wife have hired a maid at a monthly salary of $800 to help with domestic chores and childcare duties. The foreign domestic helper commenced employment on 1 September 2024. The monthly levy of $60 is paid by Benson.

p. Benson’s parents help to look after the grandchildren. His parents live with the couple. Benson’s father, a retiree, receives monthly investment income of $1,200. Benson’s mother is a housewife and derives no income. Benson also gives both his parents monthly allowance of $500 each.

q. Benson sends S$ 2,000 each month to his widowed mother-in-law who lives in Country E for her daily living needs.

r. Benson was not called up for reservist training during the year. He was a key appointment holder in the army (reservist).

s. The children do not qualify for parenthood tax rebate.

Part II
Determine the taxable net rental income from the property owned by Benson using the format provided in Appendix 1. You are to ascertain the net taxable rental income using the most appropriate basis of claiming expenses.
(15 marks)

Part III
Prepare the YA 2025 tax computation for Benson and Sarah in the format provided in Appendix 2 (you are to treat both individuals as tax resident in Singapore). If benefits are to be pro-rated based on usage, please use the actual number of days to pro-rate (there are 29 days in February 2024 and 366 days in the calendar year 2024).
Where an item of receipt is not brought to tax (or conversely an item of expense is not claimed for deduction), please insert in “0” (zero) in the tax computation and state the reasons separately – e.g., not taxable as not remitted to Singapore or not deductible as capital in nature.
Benson and Sarah would like to maximise any claims for deduction to achieve an overall lower tax liability. You are to consider all relevant personal tax relief and where it is not available, please insert in “0” (zero) in the tax computation and state the reasons why the claim is not admissible – e.g.. income more than $4,000.
(65 marks)

Appendix 1

Appendix 2

Transportation Benefit

• Only expenses incurred for private usage are taxable.

• Provision of car by the employer (employer purchase car for employee’s use) (effective YA 2020).

A. Brand new motor car provided by employer: [3/7 x {Cost of car – PARF rebate}/10] Where:
• Cost of car should include the COE (certificate of entitlement).
• PARF = Preferential Additional Registration Fee rebate to be granted when the car is de-registered between the car age of 9 and 10 years.

B. Running expenses paid by employer: 3/7 x actual running and maintenance expenses (petrol, car park charge, ERP charge, etc.) incurred by employer

Value of benefit = 3/7 x [(car cost – PARF rebate)/10 + actual running and maintenance costs incurred by the employer]

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