PERSONAL FINANCIAL MANAGEMENT.

PERSONAL FINANCIAL MANAGEMENT
1
PERSONAL FINANCES
Student’s name
Professor’s name
Assignment No
Date

PERSONAL FINANCIAL MANAGEMENT
2
INTRODUCTION
“The management of personal finance is a crucial aspect that needs to be thought of
before disseminating any decision that may affect the wealth status of an individual,” (Chan,
2010). This paper will major on the different elements of wealth, i.e., wealth planning and wealth
giving through various facets of tax planning and insurance planning as discussed below;
QUIZ 1
WEALTH PROTECTION- TAX PLANNING
An individual has the option to protect his or her wealth from additional liabilities by
utilizing the available incentives through efficient tax planning and insurance planning. Tax
planning and insurance planning are valuable tools that a person can use to minimize on the
outstanding liabilities.
1a. Tax avoidance vs. tax evasion
John, Hanlon & Nemit (2013), Tax avoidance is legal, and it involves an individual or
corporation avoiding or minimizing his tax liabilities through efficient tax planning. That is by
utilizing the available tax incentives to reduce the tax liability. Tax evasion is an illegal activity
whereby the individual or corporation avoids to pay taxes for example by transferring assets or
by stating a lower income than the actual.
Examples of tax avoidance
I. Dr. Smart can make use of the CPF contributions for instance by making high savings thus
reducing the tax liability.

PERSONAL FINANCIAL MANAGEMENT
3
II. Filing for an assessment that is separate with that of his wife will also get tax benefits to
them.
III. Dr. Smart can also avoid tax liabilities by reducing the amounts of dividends received from
the company and instead retain the profits.
Examples of tax evasion
I. Dr. Smart can illegally avoid paying taxes by filing an incorrect return on his income that is
lower than the actual salary he gets.
II. Also, he may evade taxes by transferring some of his assets to another person to reduce his
tax liability.
III. Dr. Smart can evade paying taxes through claiming illegitimate tax reliefs that he should
not claim.
It is evident that by utilizing the available tax incentives, Dr. Smart can avoid or reduce
his tax liabilities legally without breaking the law instead of evading from paying taxes. Tax
evasion is considered as an illegal activity that may cause one to be charged fines or even being
jailed depending on the offense that one has committed.
1b(i) Tax implications
A tax implication is considered as the effect that a tax policy of a given tax system in
your country has on your income or profits gained. The tax implication on a given income is
provided as per the Income Tax Act of Singapore;

PERSONAL FINANCIAL MANAGEMENT
4
I. Salary to Dr. Smart’s wife
The wages of the wife would be taxed under the husband’s if they controlled more than
twelve and a half percent (12 ½%) of the shares in the company. Before the year 2005, there was
just a combined assessment where a married woman’s income was charged under the husband’s
name unless she filed for an evaluation separate from the husband. The income/salary of Dr.
Smart’s wife is taxable at the rate of 15%-22%.
II. Director fee to Dr. Brilliant’s mother
The tax implication is that the mother’s income will be taxed separately as her income
and it will not be included to that of the son, Dr. Brilliant. Since the mother is residing in
Australia, we consider her to be a non-resident. The income should have been exempted from tax
but this does not apply if one is working as a director of a company thus the director fee of the
mother will be taxed at a rate of 22% which is withholding tax and at a rate of 20% if it is prior
to the year of income 2017.
If the mother was present in Singapore for 183 days, then her income will be taxed as a resident
of the country.
Calculation
NB: Assuming there is no other income
= 22% * $120,000