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The deadline for individual income tax returns is just around the corner.

THIS is the time of the year when taxpayers file their income tax returns - a mundane exercise for most. But for taxpayers who fail to report accurately, the penalty could be painful, involving fines or even a jail term.

As a result of the hot property market last year, two groups of taxpayers - Singaporeans who rent out their properties and real estate agents - can expect to be scrutinised closely this year.

Although every taxpayer is expected to file his returns responsibly, the Inland Revenue Authority of Singapore (Iras) is urging landlords and real estate agents to exercise extra care when filing this year.

Said Iras: ‘As the rental market had been active in 2007, Iras will put more emphasis on rental income declaration so as to ensure that taxpayers report their rental income correctly.’

Boosted by a buoyant economy and population growth, residential rents surged more than 40 per cent last year.

It is no wonder that Iras expects to step up checks on taxpayers who do not declare their full rental income or who make wrongful claims for expenses against their rental income.

Iras noted: ‘Our checks will include verification of gross rental and expenses and requests for supporting documents.’

Property agents can expect the same treatment from Iras, which will be checking and verifying the details of their income declarations.

This year, online tax returns must be completed by April 18; hard-copy forms must be posted to Iras by April 15.

According to Iras, there are several areas where individual taxpayers tend to make mistakes. These include the reporting of rental income as well as claims for parent relief or child relief.

For the self-employed, common mistakes include wrongful declaration of income and wrongful claims for expenses.

WHAT INDIVIDUALS SHOULD WATCH

Rental income, expense claims

FAILURE to report the gross rental income collected is a very common mistake. In most cases, taxpayers omit the income they get for furniture and fittings.

In a tenancy agreement, the gross rent is usually broken down into various components: rent for premises, rent for furniture and fittings, and service charges. When declaring rental income, taxpayers need to give the gross or total figure.

Other mistakes include reporting rental income based on estimates as well as incorrect expense claims. Taxpayers should note that expenses such as mortgage interest incurred on personal loans are not allowable. You can claim interest only on your mortgage loan.

Non-tax-deductible expenses include the cost of renovation, depreciation of furniture and fittings, and the legal costs incurred to secure the first tenant.

Deductible expenses are interest on your mortgage loan, property tax, fire insurance, commission paid to get a subsequent tenant, and expenses on repairs and maintenance.

Taxpayers should provide a working computation of how they arrived at the net rental income, with details of deductible expenses for each property .

In order to substantiate the income declared and expenses claimed, taxpayers should keep supporting documents such as tenancy agreements, mortgage interest statements, and invoices and receipts showing the expenses incurred.

Case study

Businessman Patrick Soon (not his real name) rented out a property , but did not declare the rental from the furniture and fittings. He thought he needed to declare only the rental for the premises.

He also claimed for personal medical and overseas travel expenses against his rental income.

After factoring in the rental for furniture and fittings and disallowing the private expenses, Iras found his additional taxable income came to about $100,000 a year. Additional tax and penalties were also imposed, according to Iras.

Parent relief

TAXPAYERS can claim this relief if they supported their parents, grandparents or great-grandparents in the previous year.

Common problems include duplicate claims and non-eligibility because of the dependant’s income level or age. Like many taxpayers, you might not be aware that this relief can be claimed only if the following conditions are met:

The dependant must have been 55 or above in the previous year;

His or her annual income (including dividends, interest and pensions) did not exceed $2,000 in the previous year;

He or she lived in Singapore in the previous year;

If he or she did not live in your household, you incurred $2,000 or more to support him or her; and

No one else is claiming this relief in respect of the dependant.

Case study

Ms Margaret Ang (not her real name) claimed the relief for both her parents, who had lived in her household for assessment years 2005 to 2007.

Iras found her father’s income had exceeded $2,000 in each of the years from 2004 to 2006. The relief in respect of her father had to be withdrawn; only that in respect of her mother was allowed.

Child relief for working mums

WORKING mothers who were married, divorced or widowed in the previous year can claim this relief. However, some do not realise they cannot do so if their children are not Singapore citizens.

Case study

Ms Selina Lee, a non-Singapore citizen, claimed the relief for her three children for assessment years 2005 to 2007.

The relief was withdrawn when Iras discovered that all three children are not Singapore citizens.

WHAT TO AVOID IF YOU ARE SELF-EMPLOYED

MISTAKES made by sole proprietors and those in partnerships include reporting of income under an incorrect category and wrongful claiming of expenses.

Many also keep incomplete records, for example, they don’t always hang on to receipts for public transport and entertainment expenses, which must be incurred for business purposes only.

Case study

Mr Robert Chan (not his real name) is a real estate agent who earns commission income. In his tax returns for assessment years 2005 and 2006, he claimed substantial deductions for transport expenses.

Subsequent checks by Iras revealed some of these expenses were incurred in respect of his private car, so the deductions were not allowed. However, the remaining claims were allowed after he was able to produce receipts to show that they were public transport expenses incurred in the course of his business.

Mr Chan had also claimed entertainment and gift expenses based on estimates. Without enough documents to substantiate the claims, those expenses that could not be fully substantiated were disallowed as deductions.

The additional taxable income totalled $126,000 for the two assessment years.

Source : Sunday Times - 30 Mar 2008

Q I AM a 29-year-old executive with no assets except for some small savings, several insurance plans that will pay out on my death and an HDB flat that I will eventually co-own with my older sister.

I am estranged from my father, who divorced my mother more than 10 years ago and has not supported us since. I do not wish to leave a cent to him, my step-siblings or my step-mother.

I have nominated beneficiaries for the payouts from my insurance plans, and I have excluded my father.

If I do not make a will, is this enough to ensure that my father cannot get a share of my money when I die?

A IF YOU die intestate, that is, without a will, your estate will be distributed to your parents in equal shares if you are single at that point. If you are married without children, half will go to your parents and the other half to your spouse.

Thus, you should make a will if you do not wish to leave anything to your father.

The death proceeds from your life insurance policies will go to the beneficiaries you have named. In the unlikely event that your named beneficiaries do not file a claim with the insurance companies, your executor (if you die with a will) or administrator (if you die without one), or any legitimate claimant under insurance laws (such as your father), can seek to have the proceeds paid to them.

The recipient would then be legally obligated to distribute the proceeds in accordance with the law, that is, as specified under your will, in accordance with intestacy laws or to your named beneficiaries, as the case might be.

If your co-owned HDB flat is held under a joint tenancy, your share would go to the surviving joint tenants. If it is held under a tenancy in common, your share would be distributed in accordance with your will, or intestacy laws if you die without a will.

Leong Sze Hian President Society of Financial Service Professionals

Advice provided in this column is not meant as a substitute for comprehensive professional advice.

Source : Sunday Times - 30 Mar 2008

Q I AM wondering if I should continue to rent out my property or dispose of it and use the proceeds to buy an annuity that will provide a retirement income.

Rentals will rise with inflation while an annuity is more or less fixed and will not keep up with inflation.

Being a landlord, however, also has its minuses. As the property gets older, repairs and maintenance will get more costly. Also, in a recession or if supply exceeds demand, rentals will fall.

What would you advise?

A IN RECENT months, property investments and annuities have generated much debate among Singaporeans.

Improper management of these financial vehicles could have an adverse impact on your retirement plans, so let us look at the key characteristics of these two asset classes.

Property investments are popular because of their potential capital gains. In a boom cycle, they offer attractive capital appreciation. In contrast, annuity products have no potential for capital gains.

On the income side, rentals fluctuate as demand and supply conditions change. Thus, property investments may not be able to provide the constant and predictable cash flow that annuities can.

This uncertainty could be painful for retirees who rely solely on rentals for their retirement income. Furthermore, repairs and maintenance are unavoidable and potentially troublesome.

The most attractive benefit of an annuity is that you have a guaranteed stream of regular income throughout your lifetime. You need not worry about outliving your savings. This makes annuities an apt choice for many retirees.

Also, the introduction of the National Lifelong Income Scheme, or CPF Life, which is essentially an annuity scheme, allows you to explore more ways of generating a retirement income, as you can pledge your property towards the Minimum Sum.

If you sell a property that has been pledged, the money from the sale of the property would be returned to your Minimum Sum. This could then be used for an additional stream of income for life.

In your case, this certainly sounds like good news. You can keep your pledged property for rental income and enjoy any market upside, while the monthly payout from the Lifelong Income scheme covers your basic living needs.

When planning for retirement, you must first ensure that your minimum cost of living over your lifetime is provided for - in this case, with an annuity product. Indeed, the CPF Board has effectively addressed the basic retirement needs of many Singaporeans with the Lifelong Income scheme.

You can supplement your income by investing in other asset classes, such as pension endowments, real estate investment trusts or dividend-paying stocks. You can even take up an additional private annuity.

A well-diversified retirement portfolio will provide a staggered stream of income from various sources as you get older. As it is becoming increasingly common for people to have more than one source of retirement income, it is important to manage all these financial instruments properly.

I would advise you to engage a professional financial planner to work out your retirement expense cash flow and assess how your annuity or rental income can complement your current retirement portfolio as a whole. Do this before you decide to sell your property , buy a private annuity or choose a CPF Life option.

Xanne Leo Sen Yun Associate Manager New Independent

Advice provided in this column is not meant as a substitute for comprehensive professional advice.

Source : Sunday Times - 30 Mar 2008

Luxury living goes up a notch with personal housekeeping and sommelier services at the first Ritz-Carlton Residences in Singapore.

THE first Ritz-Carlton Residences in Singapore - and Asia - is sparing no expense to make its residents feel right at home.

The 36-storey luxury residence in Cairnhill Road, which has 58 residential units, will feature three recreation sky terraces. Spanning over 5,000 sq ft each, the one on the fourth level will have a 34m-long lap pool, hydro pool, gym, yoga space and spa facilities.

There will also be a reading room and a cafe with billiard tables on the 14th floor. With a gourmet kitchen and a wine cellar on the 24th floor, a team of service staff can also help residents organise private parties for up to 20 people.

The project is a partnership between The Ritz-Carlton and Hayden Properties , which is a joint venture between real estate firm KOP Capital and Emirates Tarian Capital.

Prices for each 2,800 sq ft three-bedroom unit start from $11.5 million, while the 3,057 sq ft four-bedroom ones go from $15.5 million, says Hayden’s managing director Ong Chih Ching.

The junior penthouses, which are more than 3,500 sq ft, cost from $18 million. The project is expected to be completed in 2010.

At the launch last December, the development achieved a record price of $5,146 per sq ft (psf) or over $15 million for a four-bedroom unit. That month, it also sold four other units from $5,053 psf upwards.

But sales have slowed down since. Last month, only a three-bedroom unit was sold at $4,140 psf, which is about $11.6 million, and none in January.

The market is expected to remain lacklustre given the snowballing global financial crisis originating from the United States, say property experts.

Property developers in Singapore say they sold only 185 new units in February, down from the 328 sold in January.

So far, 30 per cent of the The Ritz-Carlton Residences’ apartments have been snapped up. Currently, more than 50 per cent of the buyers are from Russia, Indonesia, Japan, Korea and the Middle East. A few also intend to lease out their units, says Ms Ong.

Monthly rentals at The Ritz-Carlton Residences could fetch more than $25,000 for the four-bedroom units. Already, a 2,885 sq ft four-bedroom unit at the nearby Ardmore Park, which is located off Draycott Drive, is going for $22,000 a month.

However, all this luxury does come at a price. At The Ritz-Carlton Residences, residents have to pay a $2,500 monthly fee, which will include a 24-hour concierge service, housekeeping and sommelier service.

Source : Business Times - 29 Mar 2008

SINGAPORE will have 10 integrated public transport hubs in about 10 years.

The Land Transport Authority (LTA) yesterday awarded a ‘white’ site at Serangoon Central for an integrated development to a unit of Pramerica RealEstate Investors (Asia) and reiterated that four more integrated public transport hubs will be built - at Marina South, Jurong, Joo Koon and Bedok - over the next 10 years.

Typically, these developments comprise air-conditioned bus interchanges, MRT stations and retail/other developments.

So far, three such hubs have been completed - at Ang Mo Kio, Toa Payoh and Sengkang. Another two are being built - at Boon Lay and Clementi - slated for completion by 2009 and 2011 respectively, LTA announced.

‘Integrated public transport hubs will enhance connectivity by making our bus interchanges and MRT stations more accessible,’ LTA chief executive Yam Ah Mee said in a statement yesterday.

‘Residents have told us they enjoy the comfort and convenience of our air-conditioned bus interchanges at Ang Mo Kio, Toa Payoh and Sengkang. Public transport ridership at these areas has gone up steadily.’

Pramerica Asia will develop a mall on the Serangoon Central site, which it clinched for $800.9 million or $850 psf per plot ratio.

LTA said in its statement: ‘Under this tender, the developer will design and construct a development with a bus interchange, to be integrated with the Serangoon North-East Line MRT Station and the Serangoon Circle Line MRT Station.’

In its release yesterday, LTA did not give the locations of the four new integrated public transport hubs.

But market watchers reckon the ones in Jurong and Bedok are likely to be around the existing Jurong East and Bedok MRT stations.

The Marina South hub could be in the vicinity of a new station planned to serve the new cruise terminal at Marina South as part of an extension to the current North-South Line, which now ends at Marina Bay Station.

Source : Business Times - 29 Mar 2008