Malaysia Budget 2027: growth, skills and innovation take centre stage

Malaysia Prime Minister Anwar Ibrahim unveiled the country’s 2027 Budget on 9 October 2026, outlining 510 billion ringgit in expenditure and investment, up from 470 billion ringgit in the 2026 Budget. 

This year’s budget, themed "Reaching for the Sky, Rooted in the Earth”, places a strong emphasis on easing cost-of-living pressures while pursuing longer-term reforms aimed at raising incomes, strengthening social protection and supporting economic growth. 

Anwar, who is also the country’s finance minister, points out that the budget combines targeted assistance with measures designed to boost productivity and improve living standards.

The key numbers from Malaysia’s 2027 budget are:

• Revenue: 380.8 billion ringgit
• 2027 GDP growth forecast: 4.2 per cent to 5.2 per cent
• Fiscal deficit: 3.3 per cent of GDP 
• Fuel subsidies: 40 billion ringgit
• Subsidies, assistance and incentives: More than 80 billion ringgit
• Strategic focus: productivity, inclusivity and high-value economic growth

The focus areas of the budget are:

• Supporting households through expanded assistance, tax relief and cost-of-living measures.
• Investing in education, healthcare, workforce development and social protection.
• Driving economic growth through infrastructure, business support, and regional development.

CPA Australia’s analysis of Malaysia Budget 2027

This budget includes a broad range of initiatives, several of which are aligned with recommendations made by CPA Australia.

CPA Australia used its pre-budget submission to call for measures to lift productivity, including investment in management capability, workforce skills and more effective government programmes. The submission also recommended greater support for digital transformation, artificial intelligence (AI) adoption, cyber resilience and improved access to finance businesses seeking to invest in productivity improvements. 

Other priorities included targeted household support, stronger retirement preparedness, improved tax administration and fiscal sustainability. CPA Australia also advocated for measures to enhance business competitiveness through sustainability initiatives and low-carbon supply chains, supported by greater coordination, transparency and accountability across government programmes.

Individual tax reliefs

Budget 2027 delivers tax relief for middle-income Malaysians through a combination of lower tax rates and higher tax deductions. 

Individual tax relief has been increased from 9,000 ringgit to 12,000 ringgit, while tax rates for those earning between 70,000 ringgit and 150,000 ringgit will be reduced by one percentage point. Relief has also been expanded to cover healthcare, elder care, education and skills training, sports equipment, and AI subscriptions for young Malaysians. Meanwhile, the tax rate for individuals earning more than 1 million ringgit will increase to 30 per cent.

The measures are designed to boost disposable income and support household spending amid ongoing cost-of-living pressures. By broadening eligible deductions to reflect modern spending patterns, particularly in skills development and digital tools, the government is also encouraging Malaysians to invest in lifelong learning and future-ready capabilities.

CPA Australia supports the personal tax measures announced in the budget as they will provide meaningful support to taxpayers while encouraging investment in skills and technology. 

Surin Segar FCPA, chair of CPA Australia’s Malaysia Tax Committee says the increase in individual income tax relief and lower tax rates for selected middle-income earners are positive steps that could help improve disposable income at a time when many households continue to face cost-of-living pressures. 

"The personal tax measures announced in Budget 2027 reflect an important recognition that taxpayers need support in managing the rising cost of living, while also equipping Malaysians for a changing economic landscape.  

"The increase in individual income tax relief from 9,000 ringgit to 12,000 ringgit is a welcome revision, particularly as the threshold had remained unchanged since 2010. Together with the reduction in selected individual income tax rates, these measures can provide additional disposable income and much-needed relief for middle-income households.”

Increase in minimum wage

Beginning June next year, the minimum wage will increase from 1,700 ringgit to 2,000 ringgit per month, with the government claiming it will benefit more than four million workers. However, micro small medium enterprises (MSMEs) with annual sales below 50 million ringgit will be exempted from this new minimum wage policy.

The government will also introduce a new minimum salary benchmark of 2,500 ringgit a month for semi-skilled workers and graduates.

In addition, government-linked investment companies (GLIC) and government-linked companies (GLC) have committed to raising their living wage benchmark from 3,100 ringgit to 3,400 ringgit a month.

Cash assistance and subsidies

More than 80 billion ringgit has been allocated for subsidies, assistance and incentives, including 40 billion ringgit for fuel subsidies and nearly 3.3 billion ringgit in welfare aid. 

The allocation for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) or cash assistance program has increased by 1 billion ringgit to 16 billion ringgit.

Under the enhanced scheme, all STR recipients will receive SARA assistance worth up to 150 ringgit per month, while Malaysians aged 18 and above who are not STR recipients will receive a 100-ringgit SARA MADANI (cash aid payment) twice in 2027. The government has also expanded this cash aid to cover fresh food purchases at Federal Agricultural Marketing Authority (FAMA) markets nationwide.

MSMEs receive tax breaks and financing support

Micro small and medium-sized enterprises emerge as beneficiaries of the budget.

MSMEs tax rates will be reduced to 14 per cent on the first 150,000 ringgit of taxable income and 16 per cent on the next 450,000 ringgit. Financing guarantees for businesses will be expanded to 32 billion ringgit, with the guarantee limit increased to 50 million ringgit. Additional guarantees of up to 1 billion ringgit will be made available to support mergers and acquisitions among local firms.

CPA Australia Malaysia Tax Committee member Tai Lai Kok FCPA welcomes the reduction in MSME tax rates, saying it should help smaller businesses retain more capital and improve cash flow amid ongoing cost pressures.

“The lower MSME tax rates are a positive step that should help smaller businesses retain more capital for reinvestment and growth. Together with the expanded financing and guarantee schemes announced in Budget 2027, the measure demonstrates a strong commitment to supporting MSME competitiveness and economic resilience.” 

Tai notes that rising costs continue to weigh on small businesses across the region.

“As highlighted in CPA Australia's latest Asia-Pacific Small Business Survey, cost pressures remain a key barrier to growth,” he adds. “Tax relief, together with expanded financing support, should improve cash flow and strengthen the ability of MSMEs to invest and expand their business.” 

The government's focus on digital capability is also reflected in measures to support AI adoption among businesses. Among them is a 30 million ringgit allocation to the Malaysia Digital Economy Corporation (MDEC) to help accelerate AI uptake and workforce development, which is estimated to assist around 4,000 SMEs adopt AI and automate operations. It will also train and certify 5,000 AI professionals.

“The 30 million ringgit allocation recognises that successful AI integration requires more than access to technology,” says Tai. “By supporting both MSME adoption and skills development, the initiative addresses some of the barriers preventing businesses from moving beyond AI experimentation.” 

Meanwhile, Malaysia’s central bank will make an additional 5 billion ringgit financing facility available to SMEs affected by geopolitical disruptions linked to the West Asia conflict.

The government also plans to table an E-Commerce Bill aimed at strengthening accountability among online platforms and sellers while protecting local businesses against unfair competition and consumers from unscrupulous online vendors.

A stronger push for innovation and AI

On the digitalisation front, 6 billion ringgit is allocated across ministries for research, development and commercialisation.

AI Malaysia Berhad, a national AI agency, will receive nearly 15 million ringgit to strengthen a safe and ethical AI ecosystem, with a target of 200,000 AI-skilled workers.

Meanwhile, the government said it will provide 100,000 additional free AI subscription slots for young Malaysians, including access to ChatGPT and other AI tools. Tax relief will also be expanded to cover AI subscriptions, reflecting the growing importance of digital skills in the workplace. 

Surin believes making AI tools more affordable could enhance AI literacy among Malaysians.

“By making these tools more accessible, the measure may encourage more Malaysians to explore new technologies, build digital confidence and discover practical ways AI can support work, study and personal pursuits,” he says. 

Talent development

Under the Bakat Madani programme, a national talent development initiative, the government aims to create 30,000 new jobs next year through partnerships with private companies, GLICs, GLCs and PETRONAS, a Malaysian multinational oil and gas company. Participating companies will be eligible for tax deductions through to 2030.

 

_{Production credit
Banner image Jackyenjoyphotography via Getty Images}