Easing the tax squeeze on sandwiched working mums with Budget 2026

IN 2016, Singapore introduced an S$80,000 personal income tax relief cap to maintain a progressive tax system while safeguarding fiscal sustainability.

In effect since 2018, the cap limits high-income earners with multiple dependents from claiming excessive reliefs, which could reduce tax revenue and undermine progressivity. The measure was to affect only a small proportion of taxpayers. Yet, the cap disproportionately impacted high-income working mothers – individuals contributing to the workforce while fulfilling caregiving responsibilities.

This is largely due to the Working Mother’s Child Relief (WMCR). Previously calculated as a percentage of the working mother’s earned income, it provided substantial support for individuals with several children and higher salaries. High-income working mothers are now unable to fully benefit from WMCR, limiting the incentive for them to remain in the workforce while raising children. 

Changing demographics, rising pressures

Family structures, caregiving needs and economic realities have shifted significantly. Fertility rates have fallen to historic lows, eldercare burdens have intensified, and female workforce participation continues to rise. 

Families are currently delaying or limiting childbearing due to rising costs and growing eldercare responsibilities. Aside from the WMCR, the government has introduced numerous tax reliefs such as Parent Relief, and Central Provident Fund (CPF) Cash Top-up Relief alongside Supplementary Retirement Scheme (SRS) contributions to help mothers remain in or rejoin the workforce, reduce financial burden on multi-generational caregiving, and promote retirement adequacy. 

However, when legitimate claims compete under a capped ceiling, the intended support is diluted. Consider someone from the sandwich generation, with three children born from 2024 onwards and elderly parents. The WMCR alone amounts to S$30,000.

Together with the Qualifying Child Relief (QCR) of S$12,000, Parent Relief of up to S$9,000, Grandparent Caregiver Relief (GCR) of S$3,000, CPF Cash Top-up Relief of up to S$16,000 and standard reliefs – the total reliefs for the female taxpayer may exceed the cap.

While the median female salary has risen from S$4,095 in 2018 to S$5,265 in 2024, the cap disadvantages the upper middle income bracket – a demographic crucial for corporate leadership and high-value economic contribution. As wages rise, more women are moving towards this ceiling, where limits on reliefs inadvertently penalise career progression. 

Evolving the relief structure

To ensure the relief framework remains equitable and responsive to today’s realities, there is scope for the government to review its structure. 

• Calibrate the overall relief cap by income and family size

Rather than a one-size-fits-all ceiling, a tiered approach would better reflect household realities. 

A tiered or family-size-adjusted cap would provide additional relief room for taxpayers with more dependents, balancing fairness with fiscal prudence. This better reflects the realities of multi-generational caregiving and supports national goals for family formation. 

The original intent was progressivity, but the cap currently affects middle- to upper-middle-income families with complex caregiving responsibilities, rather than just high earners.

• Targeted exclusions of caregiving reliefs from the cap

Reliefs that directly support family formation and caregiving, such as QCR, Parent Relief and GCR, should be treated differently. Excluding them from the S$80,000 cap while retaining scheme-level limits would help families receive full support without undermining progressivity.

Similarly, allowing CPF Cash Top-up Relief and SRS contributions outside the cap would incentivise voluntary contributions to boost retirement savings without penalising taxpayers for making responsible choices. 

• A dual-scheme WMCR framework

The change in WMCR from a percentage-based system to fixed-dollar amounts for children born from Jan 1, 2024, improves predictability. However, this disadvantages mothers earning an annual income above S$53,334 – the threshold where the new fixed relief amounts fall below the previous percentage-based entitlements. This income level sits within Singapore’s middle class, many of whom are squeezed by rising costs of living and heavy caregiving responsibilities while being ineligible for extensive subsidies. 

To address this, a dual-scheme framework could be considered where mothers can opt into either scheme each year, with the same scheme applying to all children regardless of birthdate.

A working mother could choose between the previous percentage-based scheme subject to the overall cap, or opt for the new fixed-dollar scheme with WMCR excluded from the cap. This flexibility allows families to optimise tax savings without losing other reliefs.

• Broaden parent and child relief

With fewer nuclear families and more seniors without children, expanding Parent Relief to cover extended elderly family members (such as grand-aunts or grand-uncles) would acknowledge modern multi-generational care obligations. Introducing age-based tiers within Parent Relief – offering higher relief for older dependents – would align tax support with increasing caregiving intensity. 

Excluding National Service allowances and internship stipends from the S$8,000 annual income threshold for child relief would also prevent families from losing eligibility due to temporary earnings that do not reflect sustained financial independence.

• Preserving equity through thoughtful adjustments

Singapore’s tax system is designed to be progressive, competitive and supportive of social objectives. The S$80,000 cap achieved its purpose in 2018. However, today, it interacts with policies in ways that may not fully align with national priorities regarding family formation, retirement adequacy and workforce resilience.

Budget 2026 offers an opportunity to refine the cap and relief structure. By making thoughtful adjustments, we can preserve equity while ensuring reliefs truly serve their purpose: supporting families and strengthening Singapore’s social fabric.

Both writers are from EY. Kerrie Chang is partner, people advisory services tax, and Panneer Selvam is EY Asean people advisory services tax leader.

The views presented here do not necessarily reflect that of the global EY organisation or its member firms.

For more of BT’s Budget 2026 coverage, go to bt.sg/budget26