Malaysia’s personal income tax relief system should be simplified, as the current filing process has become increasingly complex and disconnected from everyday household realities, according to tax professionals.

They say many taxpayers now have to navigate a growing list of small, highly specific deductions that are difficult to understand and apply. For ordinary Malaysians, this has made tax filing more time-consuming, stressful, and less efficient.

Growing List Of Deductions Adds Complexity

Tax professionals note that while itemised tax reliefs are intended to encourage certain spending or behaviour, the expanding list of deductions has reduced the system’s overall practicality.

Associated Chinese Chambers of Commerce and Industry of Malaysia Treasurer-General Datuk Koong Lin Loong said many reliefs look attractive on paper but are not relevant to most households.

He cited examples such as deductions for food waste disposal machines and electric vehicle charging ports, which may benefit a small segment of taxpayers but do little for the majority.

Proposal To Replace Itemised Reliefs With Higher Basic Deduction

Koong called for the current structure of multiple itemised deductions to be replaced with a single, higher basic personal tax relief for individuals and dependants.

He said consolidating reliefs would simplify the filing process and give taxpayers more flexibility to manage their finances, instead of tying tax benefits to specific products or activities.

Koong added that future tax reforms should prioritise increasing disposable income and easing financial pressure on households, rather than expanding the list of targeted deductions.

Higher Disposable Income Could Support Households And Businesses

According to Koong, higher disposable income would still support overall economic well-being even if taxpayers do not spend on items linked to specific reliefs.

He also noted that micro enterprises could benefit from a simpler system, as many small business owners file taxes under personal income tax. A higher basic relief could help ease cash flow constraints for these businesses.

Standard Deductions Suggested For Common Income Sources

Similar views were shared by SM Thanneermalai, Managing Director of Thannees Tax Consulting Services, who proposed replacing complex itemised claims with simpler standard deductions for certain income categories.

He pointed to rental income as an example, where taxpayers currently need to separately claim expenses such as quit rent, repairs, maintenance, and agent fees.

Under a standard deduction approach, taxpayers could be given a fixed deduction based on the value of their property, reducing paperwork and simplifying compliance. Thanneermalai said similar fixed deductions could also be considered for insurance, Employees Provident Fund contributions, and other investment-related savings.

Reduced Administrative Burden For Taxpayers And Authorities

Thanneermalai said a simplified relief system could reduce the administrative burden on both taxpayers and tax authorities.

With fewer itemised claims, there would be less need for audits, fewer disputes, and reduced long-term record keeping. At the same time, taxpayers could still be allowed to opt for itemised claims where it is more beneficial.

Relief Levels Should Adjust With Inflation Over Time

Tax lawyer S. Saravana Kumar said any simplified system should also include regular adjustments to exemption and relief levels.

Without periodic updates to reflect inflation and income growth, he said tax reliefs gradually lose their real value as living costs rise, reducing their intended benefit for households over time.

He added that tax measures should be supported by targeted assistance for lower-income households, particularly for essential needs such as childcare, healthcare, and education.

What This Means For Individual Taxpayers

For individual taxpayers, the discussion highlights a growing gap between how personal income tax reliefs are structured and how easily they can be used in practice.

A system built around numerous small deductions can require households to track receipts, categorise spending, and retain records over several years for relatively modest claims. This increases the time and effort involved in filing, particularly for families, self-employed individuals, and micro business owners.

A simpler structure with higher basic reliefs or standard deductions could make tax outcomes more predictable, allowing households to plan their finances without relying heavily on itemised claims. It could also reduce filing errors and disputes by lowering complexity.

At present, no changes to Malaysia’s personal income tax relief framework have been announced or legislated. Any reform would need to be introduced through the annual Budget process and applied from the relevant Year of Assessment. Until then, taxpayers will continue to file under existing rules and balance the value of itemised reliefs against the administrative effort required.

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