Budget 2027 Malaysia: Personal Tax, Payroll and HR Changes
Malaysia’s Budget 2027 announcements cover personal income tax, employee reliefs, wages and HR planning. This guide explains the proposed changes for individual taxpayers and the practical steps employers and payroll teams can prepare.
The personal tax section covers the Budget 2027 proposals rather than every existing Malaysian tax relief. Employees should check the final LHDN rules for their own claims, while employers should follow the applicable payroll calculation specifications.
Implementation note: This article summarises Budget announcements and proposals. It does not confirm that every measure has been enacted. Apply changes according to the relevant legislation, orders and agency guidance.
Budget 2027 payroll and HR highlights
| Area | Announcement or proposal | Timing stated in Budget documents |
Minimum wage | RM2,000 monthly; exemption announced for MSMEs with annual sales below RM50 million | June 2027 |
Semi-skilled workers and graduates | RM2,500 minimum wage framework | Implementation details to be confirmed |
GLICs and GLCs | RM3,400 living wage benchmark | Check organisation-specific implementation |
Individual tax relief | Increase to RM12,000 | Proposed from YA 2027 |
Resident income tax | Revised bands and rates | Proposed from YA 2027 |
Salary expense deductions | Payment channel condition, except for MSMEs | Proposed from YA 2028 |
Sources: MOF Budget 2027 Speech, paragraph 32; MOF Tax Measures, Appendices 1, 2 and 14.
1. Minimum wage assess the impact before revising payroll
The Budget announced an increase from RM1,700 to RM2,000 monthly from June 2027, with an exemption for MSMEs whose annual sales are below RM50 million. The final rules should be checked for scope, eligibility and implementation. Source: MOF Budget Speech, paragraph 32
For planning, HR should identify employees who may need a salary adjustment and prepare a cost forecast.
Illustrative example: Increasing 20 employees’ monthly salaries by RM300 adds RM6,000 a month, or RM72,000 over a full 12 months, before related employment costs. This example assumes all 20 employees require the full adjustment.
Build the forecast around:
- Direct salary increases.
- Applicable employer contributions.
- Any overtime or other payments affected by revised wages.
- Salary adjustments needed to preserve meaningful differences between roles.
Use alternative scenarios while applicability remains unresolved. This gives management a usable budget without committing payroll to an unconfirmed interpretation.
2. RM2500 wage framework review recruitment budgets
A wage framework beginning at RM2,500 for semi-skilled workers and graduates was announced. Employers should await the detailed coverage and implementation requirements. Source: MOF Budget Speech, paragraph 32
HR teams can prepare by reviewing entry-level roles, job descriptions and recruitment budgets. Document the qualifications, skills and responsibilities attached to each position so that future guidance can be assessed consistently.
3. RM3400 living wage understand the announcements scope
The RM3,400 living wage benchmark concerns the commitment by GLICs and GLCs, up from RM3,100. It should not be presented as a universal private-sector statutory minimum. Source: MOF Budget Speech, paragraph 32
For workforce planning, consider whether your salary structure supports recruitment and retention. Compare similar roles and responsibilities, rather than adopting a headline figure without reviewing affordability and internal salary relationships.
4. Personal income tax changes for employees and individual taxpayers
For YA 2027, the proposals include:
| Item | Proposed change |
Individual and dependent relatives relief | RM9,000 to RM12,000 |
Chargeable income RM70,001–RM100,000 | 19% to 18% |
Chargeable income RM100,001–RM150,000 | New band at 24%, previously within the 25% band |
Chargeable income above RM1 million | 30%; previously the 30% threshold was above RM2 million |
Proposed resident individual income tax rates for YA 2027
| Chargeable Income Band (RM) | Tax Rate (%) |
| 0 – 5,000 | 0 |
| 5,001 – 20,000 | 1 |
| 20,001 – 35,000 | 3 |
| 35,001 – 50,000 | 6 |
| 50,001 – 70,000 | 11 |
| 70,001 – 100,000 | 18 |
| 100,001 – 150,000 | 24 |
| 150,001 – 400,000 | 25 |
| 400,001 – 600,000 | 26 |
| 600,001 – 1,000,000 | 28 |
| Exceeding 1,000,000 | 30 |
These are chargeable income bands, not monthly salary bands. Source: MOF Tax Measures, Appendices 1 and 2
Payroll teams should obtain the applicable LHDN Monthly Tax Deduction (PCB/MTD) specifications before changing production calculations.
Prepare a sample payroll covering different salary levels, bonuses and employee circumstances. Compare the results with the applicable official calculation method and retain the validation records.
Avoid promising employees a fixed increase in take-home pay before checking their individual position.
What the higher individual relief means
The individual and dependent relatives relief is proposed to rise from RM9,000 to RM12,000 from YA 2027. This gives an additional RM3,000 deduction when determining chargeable income. It does not mean an automatic RM3,000 tax refund.
Illustrative example: If the entire extra RM3,000 deduction falls within an 18% marginal tax band, the relief alone reduces tax by RM540. The actual saving depends on the taxpayer’s chargeable income, eligibility and any movement between bands. This example excludes the separate effect of revised tax rates.
How to read the proposed tax rates
The table shows annual chargeable income, after applicable deductions and reliefs. Each rate applies only to income in its band. For example, reaching the 24% band does not mean all income is taxed at 24%. Use the full progressive calculation when estimating annual tax.
The lower 18% and 24% bands may benefit eligible taxpayers. However, the proposed 30% threshold above RM1 million can increase tax on the affected portion of higher chargeable income. A lower overall tax bill should not be assumed for every employee.
Personal tax relief proposals for YA 2027
The following changes are proposed for YA 2027. A category’s overall cap includes its sublimits; the sublimits are not additional allowances on top of the cap.
Health and well being including postnatal care
The medical relief category is proposed to become Health and Well-being, retaining its RM10,000 overall limit. Qualifying postnatal care from a confinement centre or qualified individual is included up to RM3,000.
Breastfeeding equipment for children aged two and below, paid for by the taxpayer or spouse, is included up to RM1,000. The existing breastfeeding equipment relief is merged into this category. Check remaining claim conditions in the final guidance before submitting expenses.
Care of parents and grandparents
The RM8,000 overall cap remains. Qualifying care at home, day care centres and residential care centres is proposed to extend beyond medical care.
Claims require receipts plus a declaration from the carer, excluding the taxpayer, spouse or children, or a copy of the carer’s work permit. Medical practitioner verification is no longer required under the proposal. Keep the specified supporting documents rather than assuming any family payment qualifies.
Education and skills training
Education fees and eligible skills courses currently under lifestyle relief are proposed to be combined under Education and Skills Training Fees, capped at RM7,000 overall.
The revised scope covers recognised Certificate, Diploma, Bachelor’s, Master’s and doctoral studies for the taxpayer, in any field, at qualifying Malaysian institutions or professional bodies.
A RM3,000 sublimit applies to recognised TVET upskilling or self-enhancement for the taxpayer or spouse. A RM2,000 sublimit covers eligible non-employment-related courses for the taxpayer or spouse, or specified STEM, arts, language and religious courses, classes or tuition for children.
Check course recognition, the learner’s eligibility and the applicable sublimit before claiming. These amounts sit within the RM7,000 cap.
Lifestyle relief for AI subscriptions and pet care
The overall lifestyle relief remains RM2,500. Proposed additions are AI software and application subscriptions for personal use by the taxpayer, spouse or child; adoption costs from registered animal shelters; and registered veterinary vaccination, spaying or neutering services.
The proposal does not create a separate RM2,500 allowance for each new item. Retain invoices and evidence of the qualifying provider or shelter.
Sports shoes within sports related lifestyle relief
Qualifying sports shoes are proposed to be included up to RM300 within the existing RM1,000 sports-related lifestyle cap, for the taxpayer, spouse, child or parents.
For illustration, RM300 for qualifying shoes and RM900 of other eligible sports expenses totals RM1,200, but the overall claim is limited to RM1,000, subject to the final rules.
SOCSO contribution relief
The existing RM350 relief is proposed to extend to mandatory LINDUNG KENDIRI contributions for passenger transport, goods or food transport, and hawkers.
An additional relief of up to RM150 is proposed for qualifying voluntary contributions to LINDUNG 24 and the 17 non-mandatory LINDUNG KENDIRI sectors. Check the actual scheme and contribution type; the additional relief is not automatic for everyone who contributes to SOCSO.
Domestic tourism entrance fees
The RM1,000 relief for qualifying attraction entrance fees and cultural or arts programmes is proposed to continue for YA 2027. Examples include museums, zoos, theme parks, national parks, marine parks and geoparks.
This is an entrance-fee measure. Do not treat the announcement as a blanket deduction for all holiday spending such as transport, meals and accommodation.
Cash donations to the School Public Contribution Fund
From YA 2027, the proposed TSUWAS expansion allows approved school funds to support operating and administrative costs, repairs, maintenance, equipment and school programmes. This broadens the fund’s permitted uses. Source: MOF Tax Measures, Appendix 10.
Qualifying cash donations to an approved TSUWAS fund are subject to the applicable 10% of aggregate income deduction limit; in-kind contributions do not qualify under this treatment. Check the fund’s approval and obtain the appropriate receipt. An ordinary school payment should not automatically be treated as an approved donation.
What employees should prepare
- Keep receipts, invoices and required declarations organised by tax year and relief category.
- Check category caps and sublimits, and avoid claiming the same expense twice or through both spouses.
- Use the final LHDN guidance and applicable TP1 form when requesting eligible reliefs through payroll.
- Reconcile income, PCB and claims when preparing the annual tax return. Do not assume every personal relief is automatically included in monthly payroll.
What payroll teams should prepare
Monitor the final YA 2027 PCB specifications, TP1 and TP3 forms updates.
5. Salary payment records strengthen payroll reconciliation
From YA 2028, the proposed salary deduction condition requires payment through financial institutions or prescribed cashless instruments, with an exception for MSME salary transactions. Source: MOF Tax Measures, Appendix 14
Review how your organisation links approved payroll to actual payments. A useful control trail connects:
- The approved payroll register.
- Payment instructions and successful payment records.
- Failed or returned transactions.
- Accounting entries and reconciliations.
Assign responsibility for resolving payment discrepancies. Finance and payroll should be able to explain any difference between the approved salary amount and the amount successfully paid.
6. Employer paid PTPTN repayments
A tax deduction is proposed for employer-funded PTPTN repayments made from 1 January 2027 to 31 December 2028. Conditions include full-time employment, no repayment consideration charged to the employee, and exclusion of business owners and employees with family ties to the employer. Source: MOF Tax Measures, Appendix 30.
For employers considering this benefit, document eligibility, management approval and payment evidence. Keep employer-funded assistance separate from deductions taken from an employee’s own salary. Confirm the employee’s tax treatment before configuring payroll.
7. Work permission for certain expatriate spouses
From 1 January 2027, work permission was announced for Dependant Pass holders married to Category I Employment Pass holders, subject to prescribed conditions. Source: MOF Budget Speech, paragraph 143.
HR should verify the applicable Immigration requirements and work authorisation before confirming a start date. The announcement should not be treated as unrestricted permission for every Dependant Pass holder.
8. MediAsas and employee medical benefits
MediAsas is announced for January 2027. For SMEs with fewer than 75 employees, a first-year premium subsidy of RM200 per employee is announced, capped at 50 employees per company. EPF members below 55 may use Akaun Sejahtera for premiums. Source: MOF Budget Speech, paragraph 86.
Review the scheme’s final coverage, exclusions and enrolment conditions alongside existing employee medical benefits before deciding whether to participate.
9. EPF membership and gig worker protection
Automatic EPF membership for citizens at age 18 was announced. Separate matching incentives were announced for eligible gig and self-employed workers. Source: MOF Budget Speech, paragraphs 34 and 35.
These measures should be assessed according to the relevant scheme rules. Do not change ordinary employee contribution settings solely because a matching incentive has been announced for a different worker category.
Frequently asked questions
Does the RM2000 announcement mean every employer must immediately change salaries
No. June 2027 was announced, alongside an MSME exemption. Check the final applicable order before implementation. [1]
Does every graduate automatically qualify for RM2500
The announcement alone does not establish each employee’s eligibility. Detailed coverage and implementation requirements need to be checked. [1]
Will every employee pay less PCB
No universal reduction can be promised. The outcome depends on the employee’s tax position and the applicable calculation rules.
Does RM12000 individual relief mean a RM12000 refund
No. It is a deduction used in determining chargeable income. The tax saving depends on the taxpayer’s position.
Can I claim every new personal tax relief in full
No. Claims depend on eligible expenditure, supporting documents, category limits and sublimits.
Can YA2027 proposals be used for a YA2026 tax return
No. Do not apply a proposed YA 2027 change to YA 2026 solely because it was announced in 2026. Follow the effective year and final rules for each measure.
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Official references
1. Ministry of Finance: Budget 2027 Speech
https://www.mof.gov.my/portal/en/news/speech/speech-the-fifth-madani-budget-2027
2. Ministry of Finance: Budget 2027 Tax Measures
https://belanjawan.mof.gov.my/pdf/belanjawan2027/ucapan/tax-measures.pdf
