Many of us contribute to the Supplementary Retirement Scheme (SRS), with the intention of setting money aside for our retirement needs, as well as gaining a tax advantage in the process. However, this entails that we put some thought into the drawdown of our SRS funds upon retirement, considering both our cash flow needs during our golden years as well as the tax concession rules around SRS withdrawal.
As a reminder (refer to Chart 1 below), with the SRS, we get a tax concession period of ten years beginning from the date of the first withdrawal, at or after the statutory retirement age (age 62 currently). Only half of the withdrawn amount from the SRS account will be subject to tax assessment, hence it is possible that someone, without other sources of chargeable income in retirement, is able to enjoy the withdrawal entirely tax-free. Planning here is therefore key to ensure there is no leakage of financial resources through tax on SRS withdrawal.
As of today, the first $20,000 of chargeable income is tax free (refer to Table 1, downloaded from IRAS website) so in practice, someone can be withdrawing $40,000 from SRS, and get away with paying no tax if that withdrawal is within the tax concession window, assuming no other sources of chargeable income.