By Rafiq Hidayat Mohd Ramli
An overview of Pelan Jana Semula Ekonomi Negara (PENJANA) and how it can affect our upcoming economic development
As part of the government's six-phase approach in managing the challenges brought forward by the Covid-19 pandemic, the Prime Minister unveiled the next phase of the strategy, phase 4 (Recovery) in his address to the whole country yesterday. June 5th, 2020.
The strategy, titled “Pelan Jana Semula Ekonomi Negara” or PENJANA outlined three main strategic thrusts mainly:
Empowering the People
Propelling the businesses
Stimulating the economy
A few things stood out as being interesting, especially those that will impact the personal finances of each individuals or families besides the obvious of people still having income if the economy continues to recover.
#1. Home Ownership Campaign
First, the initiatives introduced to improve the property and construction industry that has been slowing down due to multiple factors over the past few years. The government has decided to reintroduce the Home Ownership Campaign which will provide a full exemption for stamp duties for all loan agreements for residential property purchased between RM 300,000 to RM 2.5 million. Additionally, the government has also agreed to exempt the stamp duty for Memorandum of Transfer for the 1st RM 1 Million of the residential property purchased.
This exemption will take into effect for all Sales & Purchase Agreements signed between 1st June 2020 to 31st May 2021, with an additional requirement that the property developer needs to provide the purchaser with a discount of at least 10% for the property purchased. At this point of time, details are not available whether this exemption will include properties bought through sub sale or auction markets.
#2. Waiving the Real Property Gains Tax (RPGT)
Secondly, the government will also waive the Real Property Gains Tax (RPGT) for up to three properties per individual homeowner from now until 31st Dec 2021 and at the same time removing the 70% loan / financing requirement for 3rd property loans for any properties valued above RM 600,000.
So, what does this mean for the general public? Will houses be cheaper in general? Houses are already relatively cheap (compared to current market prices). However, if the buyers can’t afford to buy the houses in the first place, and banks are not opening or approving loans for new house purchases, not much movement will be seen here.
For those on the cusp of being able to buy or sell a house, the announcement comes in at a good time. Instead of losing 5% to RPGT for a house that you were planning to sell anyways, now you can save that additional 5% or be more willing to give additional discount to the potential buyer to that it is easier to let go of the property that you were planning to sell.
For those that were planning to buy, on the other hand, this will reduce your cost of property ownership and indirectly reduce your mortgage repayments as you would be paying less without the stamp duties.
#3. Waiving the Sales Tax for CKD and CBU
In addition to the initiatives announced to help the property sector, the government also announced that they will waive the sales tax for all locally assembled cars or CKD and will reduce the sales tax by 50% for all foreign assembled cars (CBU). Before all of you start jumping to go to your nearest car dealers (Please take note, if you plan to, please practice social distancing to help reduce the spread of the Covid-19 virus), the sales tax for cars is 10% of the total price of the car. So, while you would be seeing a discount in the prices of the car (as you’d be paying less), it’s not as much as you think. Example, if a car with sales tax (CKD) was priced at RM 100,000 before the announcement, the price of the car without the sales tax would be at RM 90,909.
For those that were planning to buy a car (because you can afford it, or it’s time to replace your current car because your previous one is costing you more on the repair and maintenance), this announcement is a boon for you.
For those that do not have any need to buy a new car, and can’t afford one. Please don’t take this announcement as a hint to buy that new car that you’ve been eyeing. Yes, it’s a 10% discount technically. However, think about the 90% that you’d be spending buying something that you don’t need. So, think a few times before deciding to buy that new car that you don’t need, because the cost of ownership is not just the loan that you’ll be paying, but also the operational and maintenance costs of the car.
#4. Tax Relief for Childcare
In last Friday's announcement, the PM also announced that parents will be given additional RM 3,000 tax relief for child-related expenses such as childcare services. While not much, this is an increase over the original RM 1,000 per annum relief provided which can be utilized to help reduce the taxes paid next year to LHDN.
#5. Travel Tax Relief
For those who like to travel (including me) whose plans have been hampered by the border lockdowns etc., the government has also announced a RM 1,000 per individual tax relief for all travelling expenses within the country that has been extended to 31 Dec 2021. This hopefully will help alleviate the impact of Covid-19 on the tourism and hospitality industry which has been one of the worse hit by this pandemic.
#6. E-wallet and MY30 incentive
There are other goodies announced by the PM yesterday including the RM 50 e-wallet (similar to the one announced by the previous government) and also RM30 under the MY 30 Programme which will allow the holder to go unlimited rides on all Prasarana-related transportation vehicles in the Klang Valley.
PENJANA shows our government's efforts to alleviate the burden on several industries that are negatively affected by the pandemic. However, the overall impact of this plan on your personal finances might be minimal compared to the ones outlined above.
What are your thoughts on the latest announcement made by our Prime Minister? Share with us in the comments section below.