- Anwar Ibrahim tabled a RM459.8 billion budget targeting a fiscal deficit of 3.3% of GDP in 2027.
- The plan raises individual tax relief to RM12,000 and cuts rates for two middle-income bands, while increasing the top rate to 30%.
- Malaysia will raise the minimum wage to RM2,000 in June 2027, while cash aid programs are set to reach about 13 million people.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim tabled a RM459.8 billion 2027 budget in the Dewan Rakyat on October 9, 2026, pairing income-tax relief with higher wage floors and expanded aid. The plan targets a fiscal deficit of 3.3% of GDP in 2027.
The package arrives as households face higher living costs. Anwar said the government had heard middle-class concerns.
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“The government hears the concerns of the middle-income group (M40), who have patiently persevered despite also being squeezed by the cost of living.”
He also framed the budget around whether economic growth reaches workers and families. “Our question is not just how the economy is to be built, but whether its growth will open up space for families to build savings, for workers to enjoy more dignified wages, for small businesses to continue to grow.”
The proposals combine household relief with a larger public-spending envelope. They also set a path for reducing the deficit while Malaysia approaches its next election.
The tax changes raise the relief ceiling and cut two middle-income rates
Individual income-tax relief will increase from RM9,000 to RM12,000 for the 2027 assessment year. Taxpayers will generally claim the higher ceiling when they file returns in 2028. The limit had not changed since 2010.
The rate on chargeable income between RM70,001 and RM100,000 will drop from 19% to 18%. For the RM100,001–RM150,000 band, the rate will fall from 25% to 24%.
The government projects that the relief and rate changes will deliver up to RM1,600 in additional disposable income to approximately 5 million taxpayers. The projection covers the combined effect of the measures.
The budget also raises the top individual rate. Taxable income above RM1 million will face a 30% rate, compared with the previous 28% rate for the RM1 million–RM2 million band.
Additional eligible expenses span family care, education and household activities. Medical relief will include postnatal-care services. Taxpayers will be able to claim all care-related expenses for parents and grandparents, rather than healthcare costs alone.
The expanded list also includes sports shoes under sports-equipment relief, children’s tuition fees, and education and skills training across all fields of study. AI-software subscriptions, pet adoption and pet vaccination expenses will qualify as well.
Three wage benchmarks reach different groups on different terms
The national monthly minimum wage will rise from RM1,700 to RM2,000 in June 2027. The change is expected to benefit more than 4 million workers.
Micro, small and medium-sized enterprises with annual revenue below RM50 million will initially be exempt. The exemption is intended to give those businesses time to adjust.
A separate starting-salary floor will apply to semi-skilled workers and graduates. Their minimum starting salary will be RM2,500 per month, under reforms to the employee-income framework.
Government-linked investment companies and government-linked companies will lift their living-wage benchmark from RM3,100 to RM3,400 per month. The government estimates that about 230,000 workers will be affected. It is also asking private employers to follow the higher benchmark.
Employers in labour-intensive industries could face added costs as the wage changes take effect. The sectors identified include plantations, palm-oil production and glove manufacturing.
Aid and development spending take a larger share of the package
The proposed spending plan is nearly 10% larger than the RM419.2 billion allocation outlined for 2026. Development expenditure will rise to RM83 billion, while subsidies, aid and incentives will receive more than RM80 billion.
Cash assistance under Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) will total RM16 billion. The programmes are expected to reach approximately 13 million Malaysians, including some middle-income households.
The budget also sets out special payments for public-sector workers and retirees. More than 1.3 million civil servants in Premier Grade B and below, including contract employees, will receive RM1,500 in special assistance. More than 1 million public-sector retirees, including veterans, will receive RM750.
The government forecasts income-tax revenue of RM199.9 billion, up 4.6%. It projects Sales and Services Tax revenue of RM73.3 billion, an increase of 9.5%.
Election pressure meets a pledge to lower the deficit by 2028
Malaysia’s 16th general election must take place by February 2028, although Anwar has said he is open to holding it earlier. The package comes after setbacks for his Pakatan Harapan coalition in the Johor and Negeri Sembilan state elections.
The next state contest on the calendar is Melaka’s election, scheduled for November 14, 2026. Analysts have described this budget as potentially the government’s last before a general election, citing its mix of middle-class tax relief, cash assistance, Bumiputera measures and wage increases.
The deficit target is 3.3% of GDP for 2027, following projected levels of 3.6% in 2026 and 3.7% in 2025. Higher global oil prices are adding fiscal pressure as the government pursues its medium-term commitment to bring the deficit to 3% of GDP or lower by 2028.
