So letâ€™s say youâ€™d been paying a voluntary 2k per month into your MPF through your employer; before the end of the tax year (now passed for 19/20) you could deposit an extra $36k lump sum to get the max tax dÃ©duction for the year?
So you just call up your MPF provider and say you want to deposit into TVC?
On your tax returns you will deduct $18k standard mpf deduction + $60k (if you max out contributions) = $78k reduction in taxable income.
$60k x 17% = $10,200 tax savings.
TVC account is subject to market risk, so you could make or lose money on your investments, or you can hold it in a money market fund and you will maintain your capital. I created two accounts (one for me and one for wife).
MIne - HK Tracker fund - down 5%
Wife - Global Equity Fund - Up 11%
Last edited by wanderer01; 30-07-2020 at 07:23 AM.
But just to be crystal clear it seems as though voluntary contributions to MPF count towards the 60K allowance in TVC? (see attached allowances PDF)
i.e. In most company schemes, the employer pays a $1,500 per month into your MPF and you as the employee also pay 1.5k (18K per annum from each) These are mandatory contributions for which there is a separate tax deductible allowance of 18k per year.
If in my earlier example, if I pay an additional 2k voluntary contributions per month to my MPF (3.5k total per month), then that 24k p.a. of voluntary contributions counts towards the maximum 60k tax deduction that also applies to TVC? i.e. the attached PDF suggests that 60k is the maximum that can be claimed for these type of voluntary schemes, but you can do it through Voluntary MPF or TVC, or a combination of both?
Unless I'm equating TVC's allowance of 60k with an additional voluntary MPF allowance of 60K?
On balance these voluntary contributions do seem like a wise move:
Just spelling out for everyones benefit - Looking at your examples:
You - 60K - 5% loss - say 1.5% in fees = $3900 loss + 10,200 tax saving = $66,100 after 1 yr
Wife - 60K +11% gain - say 1.5% in fees (1k) = $5,600 gain + 10,200 tax saving = $75,600 after 1 yr
Investing in your own ETF at 0.2% fees would save only about $850 p.a. in fees, but lose you the 10k tax saving. (any ETF dividend excluded)
Wording is very clear in your attachment as well as the name itself, TVC = Tax deductible Voluntary contribution, which is a special account and different from regular voluntary contribution (Call it VC) which is not tax deductible and the reason is quite obvious, TVC you can not withdraw same as MPF while VC you can withdraw anytime.., but you can do it through Voluntary MPF or TVC, or a combination of both?