Freelance and Medisave

[Keltzar]

I was freelancing most of last year and had a nominal amount of income to declare this year. I didn't end up paying any income tax, after assessment.

This week, I suddenly got a notice from CPF Board that I owe them medisave to the tune of $500 for 2005. That surprised me... I didn't register a company but only worked as a freelancer...

... do I still have to contribute to medisave?

Is there a minimum amount of income for the year where one does not have to contribute?

[snowspeeder]

Not sure about his issue. My guess is that our medisave account has a required minimum corresponding to a person's age? If so, means that one is expected to fill in the discrepancy if it falls short. Can somebody advise?

[Lmodel]

You'll need to contribute to Medisave as long as your declared income is more than $6k.

[Keltzar]

So lets say for a year I have both full-time + freelance income, I need to contribute a total of 6% of my total annual income?

[catchlights]

every year the stuffs from CPF board will estimate an amount for you to top up medisave before your file your tax return, base a a magic formula that foresee you will make a killing in your business, so you don't know that you really make that much of money, and need to pay up your medisave to renew your business license.

after you have declared the revenue for the past year, CPF board will re calculate you actual amount you need to top up, any excess will remain in your account, so next year you suppose to pay less, but the stuffs from the CPF board are very optimist about your business is brooming, so the next year you have to pay even more for your medisave.

however, you write to CPF board to return you the excess payment.

[Caspere]

Its time we amend the phrase to "Death, taxes, and CPF cannot run away."

[justarius]

Originally Posted by Keltzar So lets say for a year I have both full-time + freelance income, I need to contribute a total of 6% of my total annual income?

If you are registered as an employee by your company, your boss and you will be contributing to CPF already, and there's no need for you to contribute additional 6%. The 6% is only for self-employed people...

[tommon]

Just write to them. I haven't had CPF since 1996 when I turned pro

[Keltzar]

Originally Posted by catchlights every year the stuffs from CPF board will estimate an amount for you to top up medisave before your file your tax return, base a a magic formula that foresee you will make a killing in your business, so you don't know that you really make that much of money, and need to pay up your medisave to renew your business license.

That's the thing ... I declined to renew the business name last year, and decided just to be a freelancer in my own name ... so I never billed out of the business at all - it was always on my own.

Since I wasn't using a business-named bank a/c ... it didn't make sense to spend the money re-registering the company.

[eugeneceh]

CPF has stopped the practice of estimating trade income as long as you are receiving NOAs from IRAS.

You will be required to contribute Medisave as a self-employed even if you have a day job. The requirement to contribute Medisave for 2005 is based on 6-8% of your net trade income (% depending on your age), if it exceeds $6,000. Unless you contribute maximum CPF on your day job income, you still have to contribute self-employed Medisave. It does not matter whether you have a registered business or not. They "bill" you according to the income you declare to IRAS eachyear.

Hope this helps.

[glennyong]

Originally Posted by eugeneceh CPF has stopped the practice of estimating trade income as long as you are receiving NOAs from IRAS. You will be required to contribute Medisave as a self-employed even if you have a day job. The requirement to contribute Medisave for 2005 is based on 6-8% of your net trade income (% depending on your age), if it exceeds $6,000. Unless you contribute maximum CPF on your day job income, you still have to contribute self-employed Medisave. It does not matter whether you have a registered business or not. They "bill" you according to the income you declare to IRAS eachyear. Hope this helps.

ok. after reading all these, can i say that if my day job contribute maximum CPF to my account, i will not have to contribute as a self-employed ?

So whether i have a registered company or not, they will just bill me according to my annual income ?

and ok, so as long as my day job contributes the maximum CPF, i will not need to contribute anymore right ?

kinda confusing.

[catchlights]

Originally Posted by glennyong ok. after reading all these, can i say that if my day job contribute maximum CPF to my account, i will not have to contribute as a self-employed ? So whether i have a registered company or not, they will just bill me according to my annual income ? and ok, so as long as my day job contributes the maximum CPF, i will not need to contribute anymore right ? kinda confusing.

#1, you need to register your business, for doing business, including freelancing.
#2, you need to renew your business licence every year
#3, you need to contribute medisave under self employed act.
#4, you need to clear your outstanding balance of medisave before you are able to renew your business licence.

[glennyong]

i see.... i seee....

[alwayschampion]

Anyway, placing aside money for MediSave isn't a bad thing after all. It is like a kind of savings for medical purposes. Moreover, there is interest rate.

[eugeneceh]

Originally Posted by glennyong ok. after reading all these, can i say that if my day job contribute maximum CPF to my account, i will not have to contribute as a self-employed ? So whether i have a registered company or not, they will just bill me according to my annual income ? and ok, so as long as my day job contributes the maximum CPF, i will not need to contribute anymore right ? kinda confusing.

Yes. Medisave is regardless of whether you own a business. They base it solely on your net trade income assessed by IRAS. Even if you don't own a business and for example, you are a wedding photographer but you declare income in your tax returns, you will still be told to pay Medisave. When you receive your Notice of Computation, you will find another sheet called the SE3/3A document. That's where they state how much Medisave you have to pay.

If you contribute maximum CPF for your day job, you still have to write to CPF board with copies of your payslip OR letter from your employer stating your "Ordinary wage" and "Additional wage" for a particular year PLUS a letter stating you wish to "apply to limit your self-employed Medisave".

Only after approval, then you would not need to pay Medisave for that year.