Are You Self-Employed? Find Out How CPF's Contribute-As-You-Earn (CAYE) Scheme Can Help You

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04 Sep 2020

There’s nothing better than being your own boss.

With flexible hours and the freedom to choose clients and projects, the idea of freelancing has never been more alluring.

Having worked a couple of jobs back when I was a student, I felt the perks of having such autonomy.

However, I didn’t know about CPF contributions as a self-employed person (SEP) back then.

Yep, being self-employed also meant CPF contributions and filing of income taxes.

Which is a little troublesome given how manual these processes kind of are.

Understanding that the topping up process might be cumbersome to some self-employed individuals, the Government piloted the Contribute-As-You-Earn (CAYE) scheme on 1 Jan 2020.

Yes, so many CPF schemes and it’s starting to get confusing.

Fret not!

We are here to give a quick breakdown of what this is all about.

What Is This Contribute-As-You-Earn (CAYE) Scheme?

The Contribute-As-You-Earn (CAYE) scheme aims to help self-employed persons (SEPs) in making automated MediSave contributions.

It is currently targetted at freelancers who are hired by the Government for projects.

Whenever an SEP is engaged by an agency or company and earns a service payment, a portion of this payment will be deducted first and be credited into his/her MediSave account.

The rest of the service payment will then be paid to the SEP after this deduction.

How Much Do I Have To Contribute To My MediSave Under CAYE?

CAYE does not change the amount of MediSave contributions SEPs have to make based on their Net Trade Income (NTI).

(Net Trade Income = the amount you earn from your freelance job. If you’re a business owner, then your NTI is your gross trade income minus all allowable business expenses, capital allowances and trade losses as determined by IRAS.)

It is compulsory to contribute to your MediSave if your NTI is greater than $6,000.

As a quick recap, here’s the amount you have to contribute as an SEP towards your CPF:

Age	Income (NTI): Above $6,000-$12,000	Above $12,000-$18,000	Above $18,000
Below 35	4%	4-8%	8% (Max: $5,760)
35-45	4.5%	4.5-9%	9% (Max: $6,480)
45-50	5%	5-10%	10% (Max: $7,200)
50 and above	5.25%	5.25-10.5%	10.5% (Max, $7,560)

Under CAYE, the deduction from the service payment for MediSave contribution will be based on the estimated annual revenue and expenses for the year.

Your CAYE contribution rate is determined by the following formula:

CAYE contribution rate = (A x B) / C

where

A is the MediSave contribution rate for your estimated annual Net Trade Income (NTI)¹ and age for the year;
B is your estimated annual NTI¹ for the year²; and
C is your estimated annual revenue for the year²

¹ Your estimated annual NTI = estimated annual revenue – estimated annual expenses

² If your estimated annual revenue and expenses is not provided, it will be based on your actual revenue and expenses assessed by IRAS two years ago

A floor CAYE contribution rate of 2% will apply if you earned an annual NTI of more than $6,000 two years ago.

Can I Change My Estimated Revenue and Expenses?

Since it’s an estimation, there’s a possibility in changes in revenue and expenses along the way.

Don’t worry!

You can adjust your CAYE contribution rate as and when there are changes to your estimated revenue and expenses.

Here’s how you can do it:

Click on My Self-Employed Home on the CPF Homepage.

After Selecting My CAYE – Contribute-As-You-Earn, click on Update.

Input your Estimate Annual Revenue and Estimated Annual Expenses and click Calculate.

You’ll be able to see the calculation details based on your inputs.

Can I check my CAYE Payment records?

Payment records can be retrieved from the CPF portal as well.

Payment records can be filtered by time period and company as well.

How Does CAYE Benefit Me?

The CAYE scheme helps to build up your MediSave account through smaller and regular MediSave contributions, providing a hassle-free method to automate this process.

Contributing to MediSave also has these few perks:

Use of MediSave savings for
– Healthcare expenses for yourself and your family
– Premium payment for MediShield Life or MediSave-approved private integrated plans
Up to 6% (floor interest is 4%, but can go up to 5%) interest per annum for MediSave savings
Tax relief of up to 37% of your annual Net Trade Income.

Also, to address transitional issues faced during the CAYE pilot, SEPs who make MediSave contributions under CAYE in 2020 will receive a one-off matched MediSave contribution from the Government, up to $600.