18/10/2024
Macroeconomic outlook 🌏
GDP will expand between 4.5% and 5.5% for 2025
GDP growth for 2024 revised to 4.8%-5.3% from 4%-5%
Government finances 🏫
Fiscal deficit, as a percentage of GDP, to come in at 3.8% in 2025 against 4.3% in 2024
Budget 2025 totals RM421 billion versus RM407.5 billion under revised Budget 2024
A total of RM335 billion has been allocated for operating expenditure, RM86 billion for development expenditure. A separate RM2 billion will be set aside for contingency.
Federal government revenue for 2025 estimated at RM340 billion compared to revised RM322 billion in 2024.
New government borrowings are expected to decline to RM80 billion in 2025 from around RM85 billion in 2024 and RM90 billion in 2023.
Sales and service tax 💲
The sales and service tax will be expanded from May 1, 2025 and implemented more “progressively”.
Basic food items will be exempted from sales tax while retail of non-essential products such as premium imported goods such as salmon and avocado will be taxed.
Scope of services tax will be expanded to cover commercial services such as fee-based financial services.
Dividend tax 💲
A 2% tax on dividend income exceeding RM100,000 effective from the year of assessment 2025 has been proposed.
Consideration will be given to exempt dividend income from government funds such as Employees Provident Fund (EPF), mutual funds under Permodalan Nasional Bhd, and dividend from foreign countries.
Other policy measures
Excise duty imposed on sugar sweetened beverages will be raised beginning Jan 1, 2025 to 90 sen from 50 sen per litre this year.
Export duty for crude palm oil will be revised, with new, higher reference price threshold and increases in duty rates.
Threshold for windfall profit levy to kick in will be raised to RM3,150 per tonne for Peninsular Malaysia and RM3,650 per tonne for Sabah and Sarawak.
The Second Chance Policy, which has benefited over 170,000 individuals, will be expanded to include companies that have gone bankrupt.
Subsidy rationalisation 🧧
Blanket subsidy for RON95 will be rationalised in mid-2025
Starting mid-2025, the government will implement targeted subsidies for RON95 petrol, ensuring the majority of the population (85%) continue to benefit.
The government will maintain the price of RON95 at RM2.05/l for this 85%, with total subsidied worth approximately RM12bn.
Savings (~RM8bn) from reduced petrol subsidy for the wealthy (T15) and non-citizens will be reallocated towards education, health, and public transportation.
Subsidy for health and education will also be rationalised
Subsidy, assistance, and incentives for farmers and fishermen will be raised to RM2.78 billion from RM2.6 billion
Cost of living 💰
Outlay for cash transfers under Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah programmes raised to RM13 billion from RM10 billion.
Monthly minimum wage raised to RM1,700 from RM1,500 effective Feb 1, 2025. Enforcement for employers with fewer than five workers will be delayed to Aug 1, 2025.
Foreign workers are also required to contribute to EPF (11% for employees and 13% for employers)
Each public servant of Grade 56 and below, including those on contract appointments, will get RM500 while civil service retirees, including those without pensions, will get RM250.
Allocation for cash assistance under Department of Social Welfare will be raised to RM2.9 billion from RM2.4 billion
Initiatives to tackle rising cost of living will be expanded with allocation of RM1 billion, including a RM700 million programme to manage prices of goods
✨Tax incentives for individuals 🙋🏻♀️🙋🏻♂️
Relief for full medical check-up, mental health check-up or consultation and Covid-19 detection test limited to RM1,000 will be expanded
Further relief for disabled individual taxpayer will be increased to RM7,000 from RM6,000 while those with a disabled spouse will be raised to RM6,000 from RM5,000
Individual income tax relief for sports, health and medical care will be expanded to cover more people and services such as vaccinations
Tax deductions and individual income tax exemption of up to RM3,000 for child care allowance will be expanded to include elderly care
Individual income tax relief on contribution to Private Retirement Schemes (PRS) and deferred annuities will be extended by five years to 2030.
Individual income tax relief on premiums paid for education and medical insurance will be increased to RM4,000 from RM3,000.
Individual income tax relief for medical expenses up to RM10,000 will also cover those insured under co-payment policy.
Tax relief for individuals on net SSPN savings has been extended for another three years.
Individual income tax relief of up to RM3,000 for nursery or kindergarten fees will be extended for three years.
Individual income tax relief on expenses for the purchase of domestic food waste composting machines will be introduced, limited to RM2,500 once over the next three years.
Deed of assignment for life insurance policy and family takaful certificate given by way of love and affection or through a trustee, will be subjected to stamp duty at fixed rates.
Tax incentives for businesses 🏭
Expenses for purchase of computer equipment, software, and consulting fees will be given accelerated capital allowance that can be fully claimed within two years.
Tax deduction for sponsorship of “smart artificial intelligence driven reverse vending machine” will be extended by two years
Stamp duty on loan or financing agreements through the initial exchange offering platform for micro, small and medium enterprises will be exempted fully for two years.
Stamp duty for loan or financing agreements under Skim Pembiayaan Mikro for amounts up to RM100,000 will be exempted
Income tax exemption equivalent to an investment tax allowance of 60% on qualifying capital expenditure incurred “smart logistics complex” will be provided for five years.
Expenses for capacity building and software incurred by employers for implementing flexible work arrangement will be given a 50% further deduction.
Employers that provide additional paid leave of up to 12 months for staff caring for children or ill or disabled family member will be given a 50% further deduction
Employers who hire women returning to work will be given a 50% further deductions on employment expenses paid for 12 months.
A tax incentives for companies in select services activities which managed to raise exports will be expanded to include firms in integrated circuit design.
Property and homes 🏡
Individual tax relief on housing loan interest payments will be provided to encourage first home ownership.
Tax relief of up to RM7,000 for homes under RM500k (first-time buyer)
Tax relief of up to RM5,000 for homes between RM500k-750k (first-time buyer)
Government to reduce repayment in the first five years for housing loans granted under Housing Credit Guarantee Scheme offered by Syarikat Jaminan Kredit Perumahan Bhd.
Social protection 💯
Matching incentives for informal workers and those without regular income to save with EPF will be raised to 20%, capped at RM500 a year or over lifetime of RM5,000.
A social safety net scheme to cover those self-employed will be allocated RM100 million
EPF studying its scheme to allow partial transfer of savings directly to immediate family members
Government also plans to mandate retirement contributions compulsory for foreign workers, to be implemented in phases.
Ministerial allocations 🎈
Ministry of Education earmarked a record high RM64.1 billion
Ministry of Health receives second-highest budget allocation of RM45.3 billion
Ministry of Defence receives RM21.2 billion
Ministry of Home Affairs gets RM19.5 billion.
Ministry of Higher Education will get RM18 billion
Government agencies and departments 🏫
HRD Corp will utilise RM3 billion to provide three million training opportunities.
Felda, Felcra and Risda to get combined RM2.6 billion up from RM2.4 billion in 2024.
National Disaster Management Agency to be funded with RM600 to prepare for floods.
Tourism promotion will be allocated close to RM550 million ahead of Visit Malaysia Year 2026
Malaysian Anti-Corruption Commission’s allocation raised to RM360 million in 2025 from RM338 million in 2024.
National Audit Department’ funding increased to RM200 million from RM173 million.
MCMC will spend RM120 million to improve internet connectivity in public universities, schools, army camps and MARA institutions.
Malaysian Competition Commission allocated RM27 million
Legal Affairs Division gets RM209 million, up from RM194 million
Parliament to get RM180 million, part of which is to strengthen the Public Accounts Committee, Special Select Committees in the Senate and House of Representatives
A legal reform team will be formed to update commercial laws, such as the Contract Act 1950, with more than 3,000 outdated legislations need to be reviewed.
More than RM60 million allocated to upgrade judicial infrastructure including the development of an electronic judicial system
Halal Development Corporation and Malaysia External Trade Development Corporation will be merged
"Ikhtiar Kiosk Sentuhan Madani" will be introduced in locations like shopping malls to allow people to access government agencies and various services outside regular office hours.
National Scam Response Centre will be allocated RM20 million.
Online Safety Bill will be drafted to address growing concerns over cyberbullying with the National Cyber Security Agency receiving a larger budget of RM10 million.
East Malaysia 🌏
Sabah to get RM6.7 billion for development, Sarawak to get RM5.9 billion.
Special Grant for Sarawak and Sabah raised to RM600 million for each state.
Infrastructure 👷🏻♂️
Government to spend RM2.8 billion to maintain federal roads, and provide MARRIS funds of RM5.5 billion for state roads.
Letters of acceptance have been issued for 12 flood mitigation projects worth RM3 billion and proceeding on schedule.
Putrajaya to see rooftop solar installations along 5km of pedestrian walkway, and parking lots, as part of low-carbon city transformation efforts.
G1-G4 contractors, particularly Bumiputeras, will be empowered with RM1.3 billion allocation for small and medium projects as well as maintenance of public infrastructure.
Development of towns bordering Indonesia and Thailand will be allocated nearly RM1 billion for basic infrastructure
Construction and maintenance of all civil servant quarters will be allocated over RM1.8 billion.
Environment, social, governance 🌷
Carbon tax will be introduced on the iron and steel, as well as energy industries by 2026 and revenue from the levy will be used to fund research and green technology programmes.
Government sets 2027 deadline for 39 of Bursa Malaysia's top 100 companies that have yet to meet women participation requirement on boards of directors.
National Energy Transition Facilitation Fund allocation is raised to RM300 million, from RM100 million in 2024.
Application for rooftop solar quota allocation under net-energy metering is also extended until June 30, 2025.
Green Technology Financing Scheme programme continues until 2026 with RM1 billion funding.
UEM Lestra and Tenaga Nasional Bhd (KL:TENAGA) will invest RM16 billion to upgrade the grid and decarbonise industrial areas.
Ecological Fiscal Transfer Fund raised to RM250 million from RM200 million
Islamic affairs 🕌
Income tax exemption for Islamic financial activities under Labuan International Business and Financial Centre will be expanded to include qualifying takaful and related activities.
Government to provide RM100 million matching fund to encourage financing innovation to cut reliance on shariah-compliant products mirroring its conventional counterpart.
Allocation for Islamic affairs will total RM2 billion for 2025, including additional religious schools and one-off cash aid for teachers.
(Source: The Edge & Phillip Capital Management Sdn Bhd)
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