As more families move towards a double-income model to support their family expenses, working mothers play a significant role both in the workforce and at home. The change in Working Mother’s Child Relief (WMCR) from percentage of earned income to fixed amount has earned some debate in Parliament, with MPs highlighting that while the move will benefit lower- to middle-income mothers, the majority of working mothers will get less tax relief.
So, let’s examine if working mothers are really better off or worse off with the change in WMCR.
Working Mother’s Child Relief (WMCR) Was Introduced In 2004 To Encourage Women To Rejoin The Workforce
In 2004, the WMCR was introduced to encourage more women to rejoin the workforce after having children. It replaced the Enhanced Child Relief and Further Tax Rebate and also removed the educational condition (that the mother must have 3 GCE O Levels or equivalent qualifications) imposed by the Enhanced Child Relief. The relief claimable was 5% of mother’s earned income for her first child, 15% for her second child, 20% for her third child and 25% for her fourth child, capped at a maximum of $25,000 for each child inclusive of other child reliefs. This was increased to 15% for the first child, 20% for the second child and 25% for the third child and beyond in 2008.
Between 2004 and 2022, female labour participation rate increased from 51.3% in 2004 to 63.4% in 2022. While this cannot be solely attributed to WMCR, not having to pay income tax may be one of the factors that help attract mothers back into the workforce after childbirth.
Working Mothers With Their First Child Earning Above $53,333 Will Be Taxed More With The Change
As announced in Budget 2023, the WMCR will change from percentage of earned income to a fixed amount for children born or adopted from 1 January 2024 onwards.
| Child Order | WMCR For Qualifying Child Born/ Adopted Before 1 January 2024 | WMCR For Qualifying Child Born/ Adopted On/ After 1 January 2024 |
| First | 15% of mother’s earned income | $8,000 |
| Second | 20% of mother’s earned income | $10,000 |
| Third and beyond | 25% of mother’s earned income | $12,000 |
For the first child, mothers earning above $53,334 will pay more tax: $53,334 x 15% = $8000.10.
For the second child, mothers earning above $50,000 will pay more tax: $50,000 x 20% = $10,000.
For the third child and beyond, mothers earning above $48,000 will pay more tax: $48,000 x 25% = $12,000.
These changes will not affect mothers with children born before 1 January 2024 as they will continue to receive WMCR under the existing percentage of earned income approach. However, they will affect new mothers and mothers who plan to have future children from 1 January 2024 onwards.
Lower Income Mothers Already Benefit From Lower Income Tax
Given the threshold of $48,000 to $53,334, the change will benefit lower income mothers who may already be paying little to no income tax.
According to IRAS, the first $20,000 of chargeable income is completely tax-free, the next $10,000 is taxed at 2% and the following $10,000 is taxed at 3.5%. Additionally, working individuals are eligible for Earned Income Relief of $1,000 if they are below 55. Regardless of the change, working mothers earning below $21,000 will already pay no income tax.
Higher Income Working Mothers Will Pay More Income Tax With The Change
While we do not have the data on the proportion of working mothers in the workforce, we can use the number of married women in the workforce as a proxy.
According to Comprehensive Labour Force Survey (June 2022), slightly less than 50% of married women earned below $4,000 monthly (or $48,000 annually). The threshold of earned income affected by the change in WMCR falls right in the middle, affecting 53% of married women who earn more than $4,000.
| Monthly Gross Income | Earned Income (Monthly Gross Income × 12) | Proportion of Married Women |
| Under $500 | 1.5% | |
| $500 – $999 | $500 × 12 = $6,000 | 4.0% |
| $1,000 – $1,499 | $1,000 × 12 = $12,000 | 7.9% |
| $1,500 – $1,999 | $1,500 × 12 = $18,000 | 8.5% |
| $2,000 – $2,499 | $2,000 × 12 = $24,000 | 7.4% |
| $2,500 – $2,999 | $2,500 × 12 = $30,000 | 6.3% |
| $3,000 – $3,999 | $3,000 × 12 = $36,000 | 14.0% |
| $4,000 – $4,999 | $4,000 × 12 = $48,000 | 10.4% |
| $5,000 – $5,999 | $5,000 × 12 = $60,000 | 9.3% |
| $6,000 – $6,999 | $6,000 × 12 = $72,000 | 5.4% |
| $7,000 – $7,999 | $7,000 × 12 = $84,000 | 5.2% |
| $8,000 – $8,999 | $8,000 × 12 = $96,000 | 4.3% |
| $9,000 – $9,999 | $9,000 × 12 = $108,000 | 2.8% |
| $10,000 – $10,999 | $10,000 × 12 = $120,000 | 3.3% |
| $11,000 – $11,999 | $11,000 × 12 = $132,000 | 1.6% |
| $12,000 & Over | $12,000 × 12 = $144,000 | 8.0% |
| $20,000 & Over | $20,000 × 12 = 240,000 | 2.5% |
The following calculations assume that there is no additional tax relief (including earned income relief or qualifying child relief which would typically apply to working mothers). Earned income is taken as gross monthly income multiplied by 12 months (excluding any allowances, CPF, bonuses or variable income)
For Working Mothers With One Child
Due to the tax exemption for the first $20,000 of chargeable income, working mothers earning below $2,000 pay little to no income tax.
Working mothers earning from $2,500 to below $4,000, will pay slightly less tax between $56 to $70. However, their income tax payable is already relatively low at between $40 to $606.
Instead, the government stands to collect a lot more taxes from the higher income with the change. In particular, working mothers earning $10,000 or more will be paying more than $1,000 additional income tax and this increases as earned income increases.
This will likely affect about 15% of married women who earn more than $10,000.
| Earned Income | Income Tax Payable with WMCR of 15% for 1st Child | Income Tax Payable with WMCR of $8,000 for 1st Child | Change |
| $500 × 12 = $6,000 | No | No | No change |
| $1,000 × 12 = $12,000 | No | No | No change |
| $1,500 × 12 = $18,000 | No | No | No change |
| $2,000 × 12 = $24,000 | $8 | No | -$8 |
| $2,500 × 12 = $30,000 | $110 | $40 | -$70 |
| $3,000 × 12 = $36,000 | $221 | $160 | -$61 |
| $4,000 × 12 = $48,000 | $606 | $550 | -$56 |
| $5,000 × 12 = $60,000 | $1,320 | $1,390 | +$70 |
| $6,000 × 12 = $72,000 | $2,034 | $2,230 | +$196 |
| $7,000 × 12 = $84,000 | $2,748 | $3,070 | +$322 |
| $8,000 × 12 = $96,000 | $3,534 | $4,270 | +$736 |
| $9,000 × 12 = $108,000 | $4,707 | $5,650 | +$943 |
| $10,000 × 12 = $120,000 | $5,880 | $7,030 | +$1,150 |
| $11,000 × 12 = $132,000 | $7,053 | $8,550 | +$1,497 |
| $12,000 × 12 = $144,000 | $8,310 | $10,350 | +$2,040 |
| $20,000 × 12 = 240,000 | $21,910 | $27,230 | +$5,320 |
For Working Mothers With Two Children
The WMCR is stackable up to a cap of 100% of the mother’s earned income. Thus, mothers with 2 (or more) children can add up the WMCR they receive for each child.
With 2 eligible children, working mothers earning below $4,000 will pay little to no tax.
With the change to fixed amount WMCR, working mothers earning between $3,000 to below $5,000 will pay less tax.
However, working mothers earning $8,000 or more will end up paying additional $1,000 or more in income tax. At the highest income brackets, this can be higher than $10,000 income tax payable. This will likely affect 23% of married women who have a monthly salary of $7,000 or more.
| Earned Income | Income Tax Payable with WMCR of 15% for 1st Child and WMCR of 20% for 2nd Child | Income Tax Payable with WMCR of $8,000 for 1st Child and WMCR of $10,000 for 2nd Child | Change |
| $500 × 12 = $6,000 | No | No | No change |
| $1,000 × 12 = $12,000 | No | No | No change |
| $1,500 × 12 = $18,000 | No | No | No change |
| $2,000 × 12 = $24,000 | No | No | No change |
| $2,500 × 12 = $30,000 | No | No | No change |
| $3,000 × 12 = $36,000 | $68 | No | -$68 |
| $4,000 × 12 = $48,000 | $242 | $200 | -$42 |
| $5,000 × 12 = $60,000 | $515 | $690 | +$175 |
| $6,000 × 12 = $72,000 | $1,026 | $1,530 | +$504 |
| $7,000 × 12 = $84,000 | $1,572 | $2,370 | +$798 |
| $8,000 × 12 = $96,000 | $2,118 | $3,210 | +$1,092 |
| $9,000 × 12 = $108,000 | $2,664 | $4,500 | +$1,836 |
| $10,000 × 12 = $120,000 | $3,210 | $5,880 | +$2,670 |
| $11,000 × 12 = $132,000 | $4,017 | $7,260 | +$3,243 |
| $12,000 × 12 = $144,000 | $4,914 | $8,850 | +$3,936 |
| $20,000 × 12 = 240,000 | $13,350 | $25,330 | +$11,980 |
For Working Mothers With Three Children
With more children, working mothers can receive more tax relief.
With 3 eligible children, working mothers under the percentage of earned income approach would have 60% (15% + 20% + 25%) of her earned income relieved from income tax. Regardless, under both approaches, working mothers earning below $5,000 would pay no income tax.
However, working mothers earning $7,000 or more will see a sharp increase in income tax. In particular, working mothers earning $12,000 and higher will have to pay more than $5,000 in additional income tax. About 28% of married women with salaries of $7,000 or more may be affected.
| Earned Income | Income Tax Payable with WMCR of 15% for 1st Child, WMCR of 20% for 2nd Child and WMCR of 25% for 3rd Child | Income Tax Payable with WMCR of $8,000 for 1st Child, WMCR of $10,000 for 2nd Child and WMCR of $12,000 for 3rd Child | Change |
| $500 × 12 = $6,000 | No | No | No change |
| $1,000 × 12 = $12,000 | No | No | No change |
| $1,500 × 12 = $18,000 | No | No | No change |
| $2,000 × 12 = $24,000 | No | No | No change |
| $2,500 × 12 = $30,000 | No | No | No change |
| $3,000 × 12 = $36,000 | No | No | No change |
| $4,000 × 12 = $48,000 | No | No | No change |
| $5,000 × 12 = $60,000 | $80 | $200 | +$120 |
| $6,000 × 12 = $72,000 | $176 | $690 | +$513 |
| $7,000 × 12 = $84,000 | $326 | $1,530 | +$1,203 |
| $8,000 × 12 = $96,000 | $494 | $2,370 | +$1,874 |
| $9,000 × 12 = $108,000 | $774 | $3,210 | +$2,434 |
| $10,000 × 12 = $120,000 | $1,110 | $4,500 | +$3,387 |
| $11,000 × 12 = $132,000 | $1,446 | $5,880 | +$4,431 |
| $12,000 × 12 = $144,000 | $1,782 | $7,260 | +$5,475 |
| $20,000 × 12 = 240,000 | $5,190 | $23,050 | +$17,860 |
Working Mothers Earning Between $3,000 to $4,999 Will Not See Their Income Tax Increase More Than $200
Almost a quarter (24%) of married women fall into the income bracket of $3,000 to $4,999. Of these women, working mothers with at least one eligible child can expect to either pay no income tax or pay not more than an additional $175 in income tax because of the change in WMCR.
High income working mothers whose children are born/adopted before 1 January 2024 stand to gain the most from the tax relief under the percentage of earned income method. High income working mothers can expect to pay more than $1,000 in additional income tax if they earn more than $7,000 to above $10,000, depending on the number of children they can claim WMCR for.
Especially at the $12,000 and above income range, which makes up about 11% of married women, the additional income tax may be significant enough to discourage some mothers from working.
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