Who Came Out On Top For Budget 2025?

It is that time of year again. Budget 2025 has just been tabled, and it seems that Malaysia is doing a lot better than some might think; despite a rather uncertain 2024. 

The Budget was tabled during a live broadcast on 18 October 2024 and was presented by Prime Minister and Finance Minister Anwar bin Ibrahim in Parliament. 

Reducing fiscal deficit

Dubbed the “Ekonomi Madani: Memperkasakan Rakyat”, this year’s budget has smashed records once again with a total budget allocation of RM421 billion, divided into operating expenditure (RM335 billion) and development expenditure (RM86 billion). A slight improvement was also noted in the nation’s debt-to-GDP ratio, which is likely to remain at 64% in 2025.

The prime minister also reaffirmed his government’s commitment to reduce the fiscal deficit to 3.8% by 2025. This will be a further reduction from the 4.3% deficit forecast for 2024.

He also made a point to emphasise his government’s intention to further reduce its debt to RM80 billion next year, down from RM100 billion in 2022.

Widening the tax base

Malaysians can breathe a sigh of relief as it was announced that the dreaded Goods and Services Tax (GST) will not be reintroduced. Additionally, the sales tax will only be expanded to include non-basic necessities items and imported premium items. However, the service tax will be widened to commercial services such as fee-based financial service.

Unfortunately, a new dividend tax will be introduced starting in the year 2025. This new tax will apply to individual shareholders with dividend income of more than RM100,000 and will apply a 2% tax rate on dividend earnings. However, exemptions will be given to government savings initiatives such as the EPF, and unit trusts under PNB.

Business assistance and financing

Considering how well Malaysia’s economy has been doing in 2024, it is no surprise that business financing and MSME assistance would continue to win big in this year’s budget. Up to RM40 billion is being allocated to business loans and financing. This is down from RM44 billion last year, but is still a monumental amount.

Of this amount, approximately RM3.2 billion is being provided by TEKUN and BSN for small vendors. BPMB will be offering around RM6.4 billion for infrastructure development and digitalisation efforts. SJPP will also be putting out RM20 billion for SME financing purposes while also allocating another RM5 billion specifically for Bumiputera SME financing.

In addition to this, BNM will allocate around RM3.8 billion in SME loans for digitalisation, automation, and sustainability initiatives. RM650 million was also allocated in support of youth and womens’ entrepreneurship. Loan or financing limits were also raised to RM100,000 for the Micro Financing Scheme for stamp duty exemption. This will take effect from 1 January 2025. 

MSMEs will also be exempted from stamp duty on completion of loan or financing agreement with investors via Initial Exchange Offering (IEO) platform from 1 January 2025 to 31 December 2026. To round things of, a RM100 million financing fund provided is being provided to the under the Malaysian Cooperative Commission (SKM)

Education

As always, Malaysia pulls no punches when it comes down to developing the youth and minds of the nation. The Ministry of Education will be receiving a massive, record breaking RM64.1 billion allocation for general education. Of this amount, up to RM2 billion will be used for upgrading projects and the maintenance of schools throughout the country. Up to half of that amount will focus mainly on Sarawak and Sabah. The government also intends to offer up to RM5.3 billion in financial aid for education, most of which is intended to go towards lower and middle income families. 

On the other hand, the Ministry of Higher Education will be receiving RM18 billion, of which, RM4 billion will be allocated towards scholarships, loans and educational allowances. RM500 million is also being set aside for PTPTN funding prioritising STEM and IPTA subjects. In order to foster a habit of saving among students, the National Education Savings Scheme (SSPN) will also see another 3 year tax relief extension.

Apart from this, the government is also investing a large amount of money into specific education areas, such as RM50 million allocated to AI-related education, RM600 million allocated to AI R&D funds, and RM7.5 billion allocated to TVET education.

Social welfare

In order to combat the rising cost of living, the government is taking the initiative to offer assistance in the form of new and revised initiatives. For Sumbangan Tunai Rakyat (STR), single individuals will be receiving RM600 per month for single individuals while households will receive RM100 per month up to RM4,600 per household. Phase 4 of STR is slated to begin from 7 November 2024.

For the Sumbangan Asas Rakyat (SARA), up to 4.1 million STR eligible recipients will receive RM100 SARA per month. Said aid will be credited to recipient’s MyKad and recipients can use it to buy basic necessities in more than 600 supermarkets all over Malaysia.

For Child Assistance Aid, families in need of financial assistance can claim RM250 per child aged six and below, and RM200 per child aged 7 to 18. The maximum amount that can be claimed per family is set at RM1,000.

Other welfare initiatives include the Elderly Assistance Aid, which saw an increase to RM600 per month, and the Payung Rahmah allocation which increased to RM300 million.

Other notable announcements

Healthcare also saw a big allocation this year. RM45.3 billion allocated is being allocated, which is the second highest amount in the history of the nation. Of that amount, RM1.35 billion is being used to refurbish clinics and improve health facilities. The excise duty on sugary drinks has also increased to 0.40 cents per liter in the never ending war against sugar.

There are also some changes being made to tax relief. Individuals will receive up to RM7,000 in tax relief when paying for properties up to RM500,000. For properties above RM500,00, a tax relief of RM5,000 will be given instead.

Contribution towards private retirement schemes will be extended until 2030, while tax exemption for foreign income will be extended until 2036. TASKA and TADIKA payments are also seeing an extension that will last until 2027.

Other tax relief announcements include:

• Medical and education insurance increased to RM4,000
• Autism diagnosis and treatment increased to RM6,000
• OKU increased to RM7,000
• Spouses of OKU to RM6,000
• Parents of unmarried OKUs to RM8,000
• Co-payment medical insurance applicable for medical costs tax relief, up to RM10,000
• Tax relief for EV vehicle chargers now extended to household food waste composting machine

To wrap things up, it appears that the government intends to continue riding the wave of impressive growth that Malaysia has seen in 2024. While some areas have received a lower allocation compared to this year, key areas such as business and education remain a central focus for the nation.

With another record breaking allocation of funds, the government seems to be determined to ensure that the nation’s economic rebound continues on its upward trend whilst also aiming to tackle the many issues that come with rising cost of living.