You didn’t earn a ringgit more. You’ll pay RM20,000 more.

Every year, from 1 January 2027. Unless you plan before then.

Budget 2027 moved the 30% tax line from RM2 million down to RM1 million. Earn RM2 million or more, and that’s RM20,000 more tax a year on the same income. Earn RM1.5 million, RM10,000.

Most people will find out in 2028, when the bill arrives. By then, most of the choices are gone.

The best time to change it is the next two months. This post shows you how tax planning does it.

First, what changed

One line moved. Here’s exactly where.

PLAIN WORDS Think of your income as water filling a tank. Lines are painted up the side. Water below a line pays one rate; water above it pays the next. Budget 2027 repainted one line: the 30% line moved down, from the RM2 million mark to the RM1 million mark. The water didn’t change. The line did.

The water is your chargeable income: what’s left after business expenses, deductions and reliefs. Not your sales.

All three apply to resident individuals: sole proprietors, partners, LLP partners, and directors on their personal income.

Meet Mr. Tan

He didn’t earn a ringgit more. Watch what happens anyway.

Mr. Tan is a partner in a building-materials trading partnership in Ipoh. His share of the profit: about RM2.2 million of chargeable income a year. Same as last year. Same as next year. Here’s his tax bill, before and after.

So Mr. Tan asks his accountant what can be done.

That other half is still open, until Mr. Tan’s 2027 income is earned.

So how does tax planning work?

Planning doesn’t fight the rate. It decides what reaches it.

Go back to the tank. You can’t move the painted line. That’s the law. But before the water flows, you can decide when it flows, which tank it flows into, and what it’s used for on the way.

A planner asks four questions, before the income exists:

• WHENis the income earned? 2026 and 2027 meet different lines.
• WHOearns it? You, your partners or your company: different rules.
• WHATis spent, and in which year?
• HOWis it recorded on the day it happens?

Sounds simple. Here’s the catch.

The part that decides everything

A plan is only as good as its evidence.

Every saving has to survive one question from LHDN: “Why?” The answer is never your plan. It’s your records. That puts every plan in one of three boxes.

REAL

It happened, and the record proves it.

The money really moved.

There is a business reason, not only a tax reason.

Written on the day, and it matches the bank, payroll and e-invoice.

FAKE

Papers with nothing behind them.

Backdated documents.

Arrangements that exist only on paper.

LHDN sets it aside, and penalties follow.

REAL FAKE

Real papers. No real substance.

A company that does no work.

A family salary with no job behind it.

A fee with no service. It looks real until LHDN asks why.

The real fake is the dangerous one, because the owner believes it’s real. The papers are genuine; the substance isn’t. In a dispute it costs you twice: the tax you thought you saved, plus penalties.

DECORATION

Looks good on paper. Falls apart at the first “why”.

DEFENCE

Real substance, recorded on the day. Still stands when LHDN asks.

Your records are either the sword in LHDN’s hand, or the shield in yours. Which one is decided on the day of the transaction, not at the audit.

Your questions, answered short

What business owners are asking us since the Budget.

The short answers are easy. The right answer depends on your structure, and on your evidence.

A rare opportunity

Most tax knowledge keeps you safe. This round, you see it save tax.

The third job is the one people rarely get to watch. Uniquely this round, Dr. Choong Kwai Fatt shows you how tax planning works to save tax, in action, using a tax hike like this one as the live example.

And it is not only for people earning RM2 million. The RM20,000 is the example. The mechanism is the lesson. Understand how it works once, and you can see the saving in every Budget that follows.

Sources: Budget 2027 Tax Measures, Appendix 1 (resident individual rates) and Appendix 2 (individual relief) · Budget 2027 speech, para 29–31.

This article is general information, not legal or tax advice. It describes proposals in the Budget 2027 speech of 9 October 2026, which may change before they become law. Mr. Tan is an illustrative composite. Confirm your own position with a licensed tax agent before acting.