The government is considering the use of net disposable income as a new benchmark for determining eligibility for financial assistance, with the aim of reducing exclusion risks and improving fairness in aid distribution.

The proposal is still under development and is expected to be explored further during the 13th Malaysia Plan period, which begins this year.

Current Aid Benchmarks Focus On Income Groups

At present, most government assistance is determined using the Poverty Line Income, along with the B40, M40, and T20 household income classifications.

Deputy Economy Minister Datuk Mohd Shahar Abdullah said these benchmarks have guided aid allocation so far, but enhancements to the assistance framework are being studied to better reflect households’ actual financial capacity.

Net Disposable Income Aims To Reflect Living Costs

The proposed net disposable income approach considers both income and essential living expenses, offering a more detailed picture of a household’s financial position.

Under this concept, net disposable income is calculated by deducting basic expenditure for decent living, known as PAKW, from a household’s disposable income. This shifts the focus from how much a household earns to how much it has left after covering essential needs.

How Disposable Income Is Calculated

Disposable income refers to a household’s total gross income after mandatory deductions. These deductions include Employees Provident Fund contributions, income tax, zakat, and Social Security Organisation contributions.

By accounting for these deductions first, the framework aims to better reflect the amount households can realistically use for daily expenses, savings, and unexpected costs.

Location And Household Demographics May Be Considered

The government noted that the net disposable income approach could take into account differences in living costs based on location and household demographics.

This could allow households with similar incomes but different family sizes, or those living in higher-cost areas, to be assessed more equitably when determining eligibility for assistance.

Implementation Requires Further Study

The net disposable income framework is not yet in force and will require further research before it can be implemented. According to the deputy minister, comprehensive household data is needed to ensure the approach is effective and accurate.

Any changes to assistance eligibility based on net disposable income would be introduced gradually, subject to policy development under the 13th Malaysia Plan.

Potential Impact On Household Aid Eligibility

If adopted in future, the net disposable income approach could change how some households qualify for government assistance, particularly those who fall outside current income group thresholds but face higher essential living costs.

For now, existing eligibility rules based on current benchmarks remain unchanged, while studies and data work continue to assess whether net disposable income can be applied effectively.

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