2027 Budget: More cash, bigger tax breaks & other great goodies for Malaysians

KUALA LUMPUR: Malaysians can look forward to more money in their pockets under 2027 Budget, with higher cash aid, bigger tax relief, increased schooling assistance and a higher minimum wage among measures aimed at easing the cost of living.

The government has set aside RM16 billion for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara), up from RM15 billion in 2026, reinforcing its support for households grappling with everyday expenses.

Two other great news in the budget tabled by Prime Minister Datuk Seri Anwar Ibrahim yesterday were a pathway to permanent posts for more than 9,000 contract doctors and tax relief worth up to RM1,600 in additional disposable income for about five million taxpayers.

Taxpayers also stand to benefit from the increase in individual tax relief to RM12,000 from RM9,000, alongside one-percentage-point reductions in selected resident income-tax rates.

Expanded reliefs cover areas including postnatal care, caregiving for parents and grandparents, sports shoes, tuition, AI subscriptions and selected pet-related expenses.

The benefits, however, will vary according to taxable income and eligible expenditure. Households with little or no income-tax liability will gain less from tax relief than taxpayers who can claim deductions.

Taxi and school bus drivers will receive a one-off RM1,000 cash aid, benefiting 38,000 taxi and rental-car drivers and 15,000 school bus drivers.

The payments are expected to be disbursed next week, funded by proceeds from the sale of special vehicle registration numbers.

Bigger STR-Sara Allocation

Under the expanded Sara scheme, all STR recipients will receive up to RM150 monthly, equivalent to RM1,800 a year, benefiting up to nine million people.

Those outside the STR programme will not be left out.

Malaysians aged 18 and above who are not STR recipients will receive RM200 in Sara Madani assistance annually, paid in two instalments ahead of Hari Raya Aidilfitri and National Day.

The initiative is expected to reach up to 13 million people, extending cost-of-living relief beyond lower-income households.

Sara recipients will also have more options to stretch their ringgit, with credits accepted for fresh produce at 216 Federal Agricultural Marketing Authority farmers' markets and "tamu" markets nationwide.

Workers, meanwhile, will get a boost from a minimum wage increase to RM2,000 a month from RM1,700, effective June 2027.

The move is expected to benefit more than four million workers, although micro, small and medium enterprises with annual sales below RM50 million will be exempted from implementing the increase.

Gig workers will also receive targeted support, with the government and Grab rolling out a RM160 million package for e-hailing and p-hailing workers covering income support, vehicle maintenance, insurance and social security assistance.

These measures widen access to essential goods and provide direct relief.

However, the one-off payments for non-STR recipients offer temporary support rather than a recurring income boost, leaving households exposed to continuing price pressures.

RM510 Bilion Fiscal Push

Overall, the 2027 Budget delivers a larger spending envelope, higher minimum wages and expanded household assistance as the government seeks to sustain economic momentum while narrowing the fiscal deficit and cushioning households against elevated living costs.

Malaysia has, for the third time, introduced an annual budget exceeding RM400 billion for the third time, specifically RM459.84 billion.

Add the portions by government-linked investment companies (GLICs), public-private investments, federal statutory bodies and Minister of Finance Incorporated (MoF Inc) companies, the total spending and investments swell to RM510 billion, up from RM470 billion for 2026.

At RM459.84 billion, the fifth Madani Budget was 3.6 per cent more than the revised RM444.1 billion allocation for 2026.

This comprises RM376.8 billion in operating expenditure and RM83 billion in development spending.

The broader RM510 billion fiscal envelope includes RM25 billion from GLICs, RM11 billion from public-private investments and RM14.2 billion from federal statutory bodies and MoF Inc companies.

The prime minister said the true measure of the national spending plan lies in how it benefits the people, not in the size of its allocation or the number of announcements it contains.

"The budget should not be measured by the thickness of the documents, the size of its allocations or the number of announcements it contains," Anwar said when tabling the budget.

"Its true measure is far more fundamental. It is whether more people can live with dignity, and whether the Malaysia we eventually pass on to the next generation will be fairer than the Malaysia we inherited.

"If the answer is yes, then that is genuine transformation and progress," he added.

Growth Moderates, Revenue Rises

Malaysia's economy is projected to grow between 4.2 and 5.2 per cent in 2027, moderating from the revised forecast of 4.8 to 5.3 per cent this year.

Growth will depend on sustained domestic demand, income growth and investment activity amid external uncertainties, the prime minister said.

Federal revenue is expected to rise 4.7 per cent to RM380.8 billion next year, from RM363.6 billion in 2026.

The higher revenue projection provides additional room to fund public services and development, although the government must also meet rising operating costs and debt-servicing commitments.

The fiscal deficit is targeted to narrow to 3.3 per cent of gross domestic product (GDP) in 2027, from an estimated 3.6 per cent this year.

The government remains on course to bring the deficit down to three per cent by 2028.

However, fuel subsidies are expected to remain substantial at RM40 billion amid the energy crisis, while total subsidies, assistance and incentives will exceed RM80 billion.

The challenge is to sustain support for households without allowing higher expenditure and borrowing to undermine the consolidation path.

Minimum Wage Rises To RM2,000

One of the budget's most consequential measures for workers is the increase in the minimum wage from RM1,700 to RM2,000 a month, effective June 2027.

The government expects more than four million workers to benefit. The increase should lift earnings for eligible low-wage workers, potentially supporting household consumption.

The government is also raising the living-wage benchmark for employees of government-linked investment companies and government-linked companies from RM3,100 to RM3,400 a month, while setting a RM2,500 starting-wage benchmark for graduates and semi-skilled workers.

However, the minimum-wage increase will not apply to micro, small and medium enterprises (MSMEs) with annual sales below RM50 million, giving these businesses more time to adjust.

This creates a divide among workers: those employed by covered businesses will receive the higher statutory minimum, while workers in exempted firms may have to wait longer for comparable wage gains.

For smaller businesses, the exemption eases immediate cost pressures but also delays the broader wage uplift.

Education Offers Wider Gains

Education remains a major priority, with the Education Ministry receiving nearly RM69 billion, up from RM66.2 billion this year.

The budget doubles school maintenance and repair funding to RM2 billion and allocates RM1.3 billion to upgrade 682 dilapidated schools, particularly in Sabah and Sarawak.

These allocations could improve learning conditions and ease infrastructure gaps, although delivery will depend on the speed and effectiveness of project implementation.

Parents will receive higher school assistance, with Bantuan Awal Persekolahan increasing from RM150 to RM200 per pupil in 2027, benefiting 5.3 million pupils through a RM1 billion allocation.

Form Six students will receive a RM2,500 cost-of-living allowance, matching the rate for matriculation students and benefiting 90,000 students.

The government has allocated RM870 million for the Supplementary Food Programme, which provides meals to more than 800,000 pupils.

Teaching assistants will also be recruited for 200 high-enrolment primary schools to reduce teachers' administrative workload and allow them to focus on teaching.

Those Whoe Left Behind

The clearest winners from the budget are minimum-wage workers, eligible lower-income households, the M40 and other taxpayers who qualify for the expanded reliefs.

The main losers, on the other hand, are workers at exempted smaller businesses who may miss out on the wage increase, and households whose assistance does not translate into lasting income gains.

If their employers qualify for the minimum-wage exemption, these workers may continue earning below RM2,000 while workers at covered firms receive higher pay.

Businesses covered by the new minimum wage are also among those facing added pressure, as employers must absorb higher payroll costs that could squeeze margins, particularly for labour-intensive firms.

Labour-intensive businesses with thin margins could face pressure to raise prices, improve productivity or slow hiring, particularly if they cannot pass on the additional costs.

A Good Budget?

While not every sector has something to cheer about, industry observers said the budget, in general, reflected the government's continuous effort to address the rising cost of living, as well as improve the rakyat's wellbeing and busines competitiveness.

AmBank Group chief executive officer Jamie Ling said the 2027 Budget is a practical plan to sustain growth in a difficult global environment.

"It continues earlier reforms, gives targeted help to households and businesses, and supports investment in higher-value sectors.

"This is a budget of disciplined continuity. It supports growth without losing sight of fiscal responsibility.

"It also gives households and businesses greater confidence to plan, spend and invest," Ling added.

Sime Darby Property Bhd group managing director Datuk Seri Azmir Merican said the budget features decisive measures to spur domestic investment, broaden homeownership, and accelerate Malaysia's green transition.

"The budget introduces impactful solutions to make homeownership more accessible, notably through proposed stamp duty exemptions."

First-time buyers will enjoy a full exemption on loan agreements and transfer instruments for homes priced up to RM500,000, Azmir noted.

For homes priced up to RM750,000, the full exemption applies to the first RM500,000, with a 50 per cent exemption on the remaining balance.

Furthermore, the provision of RM20 billion in housing financing guarantees through Syarikat Jaminan Kredit Perumahan Bhd will offer crucial support to an estimated 80,000 first-time buyers, particularly the self-employed and those without fixed incomes.

QSR Brands (M) Holdings Bhd chief executive officer and managing director Nehchal Khanna welcomed the budget's steadfast focus on placing the rakyat's well-being at the heart of Malaysia's economic growth agenda.

"We welcome the increased allocation of RM16 billion for STR and Sara programmes, as well as the targeted personal income tax relief for middle-income earners.

"By sustaining household purchasing power, these initiatives provide crucial economic stability."

Hong Leong Bank Bhd group managing director Kevin Lam said expanded support through STR, Sara and Budi Madani fuel subsidies offers important cost-of-living relief.

"The increase in the minimum wage to RM2,000 strengthens the earnings base for lower-income workers.

"Together with middle-income tax reductions, higher tax relief limits and stamp duty exemptions, these measures can create greater room for households to manage expenses, build savings and pursue homeownership," he added.