Malaysia’s Prime Minister, Datuk Seri Anwar Ibrahim, unveiled a record RM421 billion Budget for 2025. Placing a strong emphasis on supporting individuals and households, this budget introduces initiatives aimed at tackling the cost of living, especially for the B40 and M40 groups.
The Malaysia Budget 2025 initiatives includes cash handout programs, various enhancements in personal tax relief, updates on the Sales and Service Tax (SST), a rationalisation of the RON95 petrol subsidy, an unexpected 2% tax on dividend income exceeding RM100k, and a rise in the minimum wage to RM1,700.
We look at how the Malaysia Budget 2025 will impact your wallets.
#1 Progressive Sales & Service Tax (SST) On More Luxury Goods
Say Goodbye To Cheap Avocados and Salmon! PM Anwar announced that the Sales and Service Tax (SST) will expand to cover more non-essential goods, premium imports, and even commercial services.
While the government is holding off a reintroduction of the Goods and Services Tax (GST) until Malaysians’ income levels improve, the SST will be slapped on certain luxury imports like salmon and avocado from 1 May 2025.
Basic food items like rice and veggies are safe from higher SST – which means expenses on daily essentials will remain affordable.
Also, if you’ve got a sweet tooth, you might want to cut back on sugary treats as the excise duty on sugary drinks is going up from 50 sen to 90 sen per litre starting 1 January 2025.
Read Also: Sales Tax On Low-Value Goods In 2024: How It Will Impact Consumers In Malaysia?
#2 RON95 Petrol Subsidy Rollback For Top 15% Income Earners
Starting in mid-2025, the government plans to rationalise the RON95 petrol subsidy for foreigners and the wealthiest 15% of Malaysians, aiming to save RM8 billion.
Thankfully, this change shouldn’t impact private consumption too much since the remaining 85% of Malaysians will still enjoy their subsidies. The government is committing to spend RM12 billion on petrol support for those who really need it.
Pm Anwar also highlighted that the government currently spends about RM20 billion a year on blanket subsidies for RON95, which primarily benefit high earners and some foreigners. That money could be better allocated to education, healthcare, and transportation. Nevertheless, taking cue from the recent diesel experience, we expect the B40 and M40 segments to be sufficiently compensated via cash aid.
Read Also: How Diesel And Other Fuel Subsidies Work In Malaysia?
#3 A 2% Tax On Dividend Income Over RM100,000
One unexpected implementation was a 2% tax on dividend income that goes over RM100k. For most investors, this tax should be manageable, cutting a 4-8% yield by only about 8-16 basis points.
However, it might dampen enthusiasm of those who love high-yield stocks. While wealthier individuals and public company owners may feel the impact more, most smaller shareholders likely won’t be affected if they stay below that threshold. Plus, there’s a bit of flexibility here—investors can manage their portfolios by selling profitable, high-dividend stocks and then buying them back later to potentially avoid the tax.
There could also be more investor interest in growth stocks compared to high dividend-yielding stocks.
Read Also: Guide To Investing In Malaysia’s Private Retirement Scheme (PRS)
#4 Raising The Minimum Wage Bar By 13% To RM1,700
The monthly minimum wage will be hiked 13% from RM1,500 to RM1,700 starting 1 February 2025. Smaller businesses, i.e. employers with fewer than five workers, will get a six-month grace period, pushing their deadline to 1 August 2025.
The Human Resources Ministry will roll out guidelines for starting salaries in various fields — including RM2,290 for industrial and production technicians and RM3,380 for mechanical engineers. Plus, the Progressive Wage Policy, which kicked off as a pilot program in June, will be going full steam ahead next year with a budget of RM200 million to help 50,000 workers.
Also, to tackle extreme poverty, RM250 million will be set aside for the People’s Income Initiative (IPR) to boost incomes for those in need. This reflects the government’s dedication to addressing economic disparities among Malaysians.
Read Also: What’s The Median Salary In Malaysia (At Every Age, Gender, Race And State)?
#5 First-Time Homebuyers Can Enjoy Up To RM7,000 Relief In Loan Interest Payments
The government is stepping up to promote homeownership and support individual taxpayers as well. To help first-time buyers, they’re introducing tax relief on housing loan interest payments, making it a little easier to snap your dream home.
Here’s how it works: you can claim up to RM7,000 per year for homes priced up to RM500,000, and up to RM5,000 per year for homes costing between RM500,001 and RM750,000. This tax relief can be claimed for three consecutive years, starting from the first year you start paying interest. With these incentives, it could be as good a time as any to get your new first home.
Read Also: Understanding The Overnight Policy Rate (OPR) And How It Impacts Your Home Loan
Malaysia Budget 2025 Initiatives Targeted At Lower-Income Groups
In a nutshell, Budget 2025 is a strong testament to the government’s decisive policymaking and a forward-thinking approach aimed at revitalising our economy and improving the lives of the Rakyat.
A record spending of RM421 billion has been allocated for the coming year. This expansionary budget reflects a confidence and commitment to sustainable growth in key sectors while addressing the cost of living, especially for the B40 and M40 groups.
The emphasis on progressive tax measures, increased minimum wages, and incentives for first-time homebuyers showcases a dedication to the well-being of the people and workforce diversification.
As Malaysians embrace these changes, more clarity will be essential regarding measures like the expansion of SST, the introduction of a carbon tax, and mandatory EPF contributions for non-citizen workers.
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