It’s common knowledge that there is a salary ceiling of $4,500 for both employer and employee CPF contributions.
If you earn more than $4,500, you only need to contribute $900 (=20% x $4,500) to your CPF.
Even if you make $20k a month, you still contribute $900. Your employer contributes $652.50 (=14.5% x $4,500). The rates are lower if you are above 50 years old.
But do you know there’s also a ceiling for bonuses?
It is known as Additional Wage Ceiling, or AW Ceiling in short.
The key idea is this: Your total wages subject to CPF cannot exceed $76,500 for the entire year.
This means: If you earn more than $4,500 per month and receive a huge bonus for 2009, only $22,500 of that bonus is subject to CPF.
Why? Because your ordinary wages’ CPF already amounts to $4,500 x 12 = $54,000. So this leaves $76,500 – $54,000 = $22,500 for your bonus’ CPF contribution.
When did you first hit the $76,500 limit?