PETALING JAYA: Although Malaysia has modernised its tax system and launched outreach efforts aimed at young adults, many new entrants to the workforce still misunderstand their income declaration duties, especially those earning below the taxable threshold.
Universiti Utara Malaysia School of Economics associate professor Dr Logasvathi Murugiah said this misconception is especially common among fresh graduates, part-time workers, freelancers and individuals in the informal or gig economy.
“Many young people assume that if they don’t owe any tax, they don’t need to declare their income.
“Some believe that tax filing only applies to permanent employees or that low-income earners go unnoticed by the system, which simply isn’t true.”
Logasvathi, who is a financial literacy expert, said the misunderstanding stems from several factors, including low tax literacy, confusion between declaring income and paying tax and the common belief that taxes only become relevant once a person starts earning a higher income.
“There’s a cultural mindset that tax is a ‘later in life’ issue. But the reality is, income declaration is a legal and financial responsibility that starts the moment you earn, even if it’s just from side jobs or freelance gigs.”
According to the Inland Revenue Board (IRB), individuals with an annual employment income exceeding RM37,333 (or about RM3,111 per month) and who have a monthly tax deduction are required to pay tax.
This threshold is calculated after deducting allowable tax reliefs and rebates from one’s gross income. However, even those earning below the taxable threshold are strongly encouraged to declare their income.
Logasvathi said there are many benefits in doing so, beyond just compliance.
“Young earners may not realise the advantages they’re missing out on. Filing a tax return helps build a financial record, something banks and institutions look at when you apply for loans, credit cards or government aid.
“One might even be eligible for tax refunds or reliefs they’re unaware of.”
She added that the consequences of not declaring income, even when no tax is owed, can be significant over time.
“Individuals may lose out on financial opportunities, face difficulties verifying their earnings for official purposes and risk legal penalties if they later fall under audit.
“On a national level, undeclared income contributes to revenue loss, weakens economic planning and shifts the tax burden onto those who are already compliant.
“It also erodes trust in the fairness of the system. When only some people follow the rules, it discourages broader participation.”
Logasvathi said to bridge these gaps, IRB has rolled out several digital and youth-focused initiatives in recent years.
“Since January 2024, the MyTax portal has allowed Malaysians to register, file and manage their taxes entirely online. At the same time, outreach initiatives such as HASiL Your Tax Buddy and Program Sahabat HASiL have turned to social media to engage younger audiences.
“The government is doing a lot to meet young people where they are, online. But the system still needs to be demystified. Tax education should be introduced in schools and universities so young Malaysians understand the process before they even start working.”
For those new to the system, she said the steps to get started are more straightforward than many expect.
“The first step is to register for a Tax Identification Number using the e-Daftar system on the MyTax portal. From there, you can access the e-Filing platform, declare all sources of income, including freelance or part-time work, and submit your returns before the deadline.
“There are tools to help, too. The MyTax portal is user-friendly, and IRB also offers a mobile app, a chatbot and a tax calculator to make the process easier.”
