How Much Self-Employed Persons Need To Contribute To MediSave (And What Happens If You Don’t)

Self Employed Persons (SEPs) Singapore

There is a growing number of self-employed persons in Singapore. According to the latest 2023 Advanced Labour Force Report by MOM, about 12.2% of Singapore workers are self-employed.

Self-employed persons in Singapore are required to contribute to your own CPF account each year. From the 2nd half of 2024, Platform Workers in Singapore will start receiving employer CPF contributions from their respective Platform Companies – which will also start making their employee CPF contributions on their behalf.

Read Also: Complete Guide To CPF Contribution For Platform Workers

How Much Do Self-Employed Persons Have To Contribute To Their CPF Every Year?

Unlike salaried employees, self-employed persons in Singapore are only required to contribute to their own MediSave Account (MA). Furthermore, it is only mandatory if you have a net trade income of above $6,000 a year, that you submit to IRAS.

Even if you also have another full-time job where you already have CPF contributions as an employee, you still have to contribute to your MediSave Account if your net trade income from your side hustle or freelancing gig is above $6,000 a year. This is regardless of whether you are earning more than the $6,300 monthly salary ceiling for CPF contributions. This is also the same for employees with more than one job.

Read Also: 5 Things You Need To Know About Allowing Your Employees To Take A Second Job

Similar to employees, the amount you contribute to your MediSave Account also varies according to your age and trade income.

Net Trade Income (Year)$6,000 to $12,000Above $12,000 to $18,000*Above $18,000
Below 35 Years4.00%4.00% to 8.00%8.00%
(Max: $5,856)
35 to 44 Years4.50%4.50% to 9.00%9.00%
(Max: $6,588)
45 to 49 Years5.00%5.00% to 10.00%10.00%
(Max: $7,320)
50 Years and Above5.25%5.25% to 10.50%10.50%
(Max: $7,686)
Source: CPF
(Applicable For 2023)

* To determine the actual percentage you have to pay if you earn above $12,000 to $18,000, you have to use the following formula:

Net Trade Income (NTI)Below 35 Years35 to 44 Years45 to 49 YearsAbove 50 Years
Above $12,000 to $18,000[480 + 0.16(NTI-12,000)] x 100/NTI[540 + 0.18(NTI-12,000)] x 100/NTI[600 + 0.20(NTI-12,000)] x 100/NTI[630 + 0.21(NTI-12,000)] x 100/NTI

The formula is not very user-friendly, so it is advisable to use CPF’s Self-Employed MediSave Contribution Calculator to derive how much you need to contribute to your MediSave Account. Or you could do it the hard way, like we did, with the examples below.

For example, if you earn $400 a month (i.e. $4,800 a year) from your side hustle, you do not have to make any contributions to your MediSave Account – since it is below the minimum $6,000 net trade income threshold.

If you earn $3,000 a month (i.e. $36,000 a year) you have to contribute between 8.0% and 10.5% to your MediSave Account, depending on your age. This amounts to $2,880 to $3,780. If you earn $6,300 a month (i.e. $75,600 a year) or more, you will only have to contribute up to the maximum amount.

Note that the maximum amount of $6,300 only applies from September 2023 onwards. From January to August 2023, the maximum applicable income was $6,000. That is why the maximum amount for the year (in the above table) is $7,686 – which is less than $6,300 x 12 months x 10.5% (which would have made it $7,938).

Going forward though, the maximum applicable income will rise to $6,800 on 1 January 2024, $7,400 on 1 January 2025, and $8,000 on 1 January 2026. So this maximum applicable amount is set to rise each year until then.

If you earn $1,250 a month ($15,000 a year) – this is where the complicated equation comes into play. Let’s take the example of a 45-year-old individual – who would have to contribute between 5.0% to 10.0% to their MediSave Account. The actual figure is [600 + [0.20(15,000-12,000)] x 100/15,000 = 8.0%. So, you have to contribute 8.0% (or $1,200) of your $15,000 net trade income to your MediSave Account.

Self-employed MediSave contributions
Source: CPF’s Self-Employed MediSave Contribution Calculator (This screenshot is no longer available for the new calculator, but still applies to this scenario.)

Read Also: Complete Guide To Employer’s CPF Contribution In Singapore

Self-Employed Persons Are Only Required To Contribute To MediSave

As you would have noticed, the calculations for your CPF contributions are only for your MediSave Account. This is because you don’t have to make any mandatory contributions to your Ordinary Account (OA) or Special Account (SA). Do note that from 2024, Platform Workers will start receiving both Employer’s CPF Contributions and Employee’s CPF Contributions from their respective Platform Companies – thus, receiving OA and SA contributions as well.

As a self-employed person (SEP) in Singapore, you can also choose to make Voluntary Contributions to your OA and SA to benefit from more tax deductions.

Your MediSave Account balances is meant for your healthcare needs, especially in old age. You can use it similarly to any other Singaporean or PR, to pay for eligible healthcare expenses and by offsetting some of your healthcare insurance such as MediShield Life and CareShield Life, and you can also tap on Additional Withdrawal Limits (AWLs) to pay for your Integrated Shield Plans (IPs) and CareShield Life supplements.

Read Also: Pros And Cons For Self-Employed Persons To Make Voluntary Contributions (VC) To All Your CPF Accounts

Self-Employed Persons Have To Make MediSave Contributions Even If They Hit The BHS

Even if your MediSave Account has already reached the Basic Healthcare Sum (BHS), you are still required to make MediSave contributions. This is similar to salaried employees who have hit their BHS.

The amount that you contribute, though, will not remain in your MediSave Account. Just like anyone else who has hit their BHS, any amounts that you have above the BHS in your MediSave Account will flow into your Retirement Account (if you have 55 and above) or your Special Account (if you are below 55).

If your Retirement Account has already hit the Enhanced Retirement Sum (ERS), your MediSave contributions will flow into your Ordinary Account. Similarly, if your Special Account has already hit the Full Retirement Sum (FRS), your MediSave contributions will flow into your Ordinary Account.

When Do You Need To Make MediSave Contributions?

After submitting your tax returns, IRAS will send you a Notice of Assessment (NOA). Subsequently, you will receive a Notice of Computation (NOC) stating how much MediSave contributions you have to make. You need to make your MediSave contributions within 30 days of receiving the NOC.

If you do not receive an NOA, you need to make your MediSave contributions by 31 May of the following year. This means for your net trade income in 2023, you need to contribute to your MediSave by 31 May 2024.

Read Also: Guide To Understanding Your Tax Obligations As A Self-Employed Individual

Tax Relief For CPF Contributions To Your Ordinary Account, Special Account And MediSave Account

As you know, salaried employees typically contribute up to 37% – with up to 20% coming from their salary and up to 17% coming from their employers – of their salaries to their CPF Ordinary Account (OA), Special Account (SA) and MediSave Account (MA). They receive tax relief on these contributions.

While self-employed persons only have to contribute to MediSave, you can receive a tax relief of up to 37% of your net trade income, up to the CPF Annual Limit of $37,740, by making Voluntary Contributions to all three CPF accounts. 

The portion that goes into your MA will offset your MediSave payable as a self-employed.

Of course, like any other Singaporean or PR, you can also receive tax relief for making contributions via the Retirement Sum Topping Up (RSTU) Scheme. 

Should You Make Voluntary Contributions?

If you are considering whether to make Voluntary Contributions (VC) to your CPF, you need to weigh up the pros and cons. 

Pro: you get a hefty tax relief and you are also saving up for important expenses for housing and retirement.

Con: as Voluntary Contributions are irreversible, you lose liquidity to plough funds back into potentially growing your small business.

However, you may not be eligible for the full tax relief under the Voluntary Contribution scheme if you are also receiving CPF contributions as an employee. In other words, your tax relief for the voluntary CPF contributions is capped at the prevailing CPF contribution rate of $37,740.

How To Make Your MediSave Contributions?

The easiest way is to make your MediSave contributions is via a Giro instalment plan. 

1) log in to CPF with your SingPass; and 

2) Submit the “Supply / Change GIRO for Mandatory MediSave  Contributions and Voluntary Contributions by Self-Employed” application.

You can also pay through eNETS Debit, NETS or CashCard.

What Is The Contribute-As-You-Earn (CAYE) Scheme?

For some self-employed persons, you will have a relatively short window between receiving the Notice of Computations from IRAS and making your MediSave contributions. Those who have not set aside the funds will also find themselves stretched to make the contribution in time.

To remove this hassle/stress, CAYE is a pilot scheme where the Singapore government, as a service buyer, will credit a portion of the payment to the self-employed person’s MediSave Account, before paying the remainder to the individual.

This will not change the amount of MediSave contributions that a self-employed person needs to make based on your net trade income. This formula will be used to estimate your MediSave contributions.

CAYE contribution rate = (A+B)/C

A: Your MediSave contribution rate for your estimated annual Net Trade Income and age for the year;

B: Your estimated annual Net Trade Income for the year; and

C: Your estimated annual revenue for the year

Self-employed individuals with government contracts can estimate their annual revenue and expenses by logging into CPF with their SingPass.

What Is The Drive And Save (DAS) Scheme?

Taxi drivers (separate from Platform Workers who are Private Hire Car Drivers) form a significant proportion of self-employed persons in Singapore.

Under the Drive and Save (DAS) Scheme, all taxi principal hirers who make monthly contributions to their MediSave accounts are eligible to receive co-contributions from their taxi operators. This scheme has been in place since 1 January 2011.

All eligible drivers who contribute at least $20 a month will receive a co-contribution of $20 a month from their taxi operators.

Read Also: What Is The Drive And Save (DAS) Scheme, And How It Benefits Taxi Drivers

What Happens If You Don’t Pay Your MediSave Contributions?

When you do not contribute to your MediSave Account, you are running the risk of not saving enough for your healthcare needs. This becomes especially crucial in your senior years.

Apart from that, there is also a legal requirement under the CPF Act for self-employed persons to make MediSave contributions. CPF Board will typically work with those who have genuine financial difficulties to pay through instalments or a reasonable period.

Those who do not contribute may be taken to court where you face a fine of up to $2,500 for first-time offenders and $10,000 for subsequent offences. This is usually reserved as a last resort. 

If you do not make your MediSave contributions, you may not be able to renew your ACRA or LTA licence, this may also hinder your ability to keep your bank account open. If you are in a partnership, all partners need to contribute to their MediSave before being able to renew your business licence(s). Hence, you may be at the mercy of your partners making their MediSave contributions.

Read Also: What You Need To Know About Self-Employed Person Training Support Scheme & NTUC Training Fund (SEPs)

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