What is B40, M40, T20: Understanding Household Income Classification in Malaysia

What is B40, M40, T20? Do you know which of these income classifications your household belongs to? This is an important financial matter to know, especially if your family was severely affected by the pandemic. Also, the cost of living in big Malaysian cities is high, making financial insecurity a major struggle for some individuals and families. Knowing what income classification your household belongs to will allow you to determine if you can benefit from any financial assistance from the government.

In addition, the income tax brackets for 2023 have been updated with rate reductions and increases. This means you may see some changes in your purchasing power this year.

In this guide, we take a look at what are B40, M40, and T20 income classifications, and as well as related concepts that can help you better understand income tax brackets.

Understanding household income-related terms

Before we jump into the different household income classifications, it’s important to know some key terms connected to household income in Malaysia. You will find them mentioned a lot in many documents and guides answering what is B40, M40, and T20, and they are crucial to understanding how they affect your family or household.

The Department of Statistics (DOSM) used the terms below in the Household Income and Basic Amenities (HIS/BA) Survey conducted in 2019. This survey is done twice every five years in order to monitor indicators of economic growth. In 2020, however, the department also merged the survey with their findings on the impact of COVID-19 on the Malaysian household income during the same year. Indicators related to household income included average salary and wages, economic performance by sector, employment structure, household demographics, and the value of assistance provided by the Malaysian government in 2020.

Household refers to a group of related or unrelated individuals who live together and share expenses for food, shelter, and other living necessities. In 2019, Malaysian households comprised 3.9 persons on average.

Income recipient refers to the members of the household – at least one – who received income at the time of the survey. In 2016 and 2019, there were 1.8 income recipients in Malaysia on average.

Household income, also often referred to as the gross income, refers to the total income earned by the members of a household. This can be in cash or in kind. The average monthly household income in Malaysia in 2019 was RM 7,901.

Median household income is the middle value that falls within a range of household incomes, from low to high. This represents a more accurate description of household income in an area, compared to the mean or average value.Mean household income refers to the average value determined by dividing the total household incomes by the total number of households in an area.

What is B40, M40, T20?

In Malaysia, households are categorised into three main income classifications: Bottom 40% (B40), Middle 40% (M40), and Top 20% (T20). Again, this is based on the 2019 HIS/BA survey.

What is B40 in Malaysia?

B40 represents the bottom-tier households that have an income of below RM 4,850. They are further classified into four sub-groups based on the following income range:

What is M40 in Malaysia?

M40 represents the middle-tier households whose income falls between RM 4,850 to RM 10,959. They are further classified into four sub-groups based on the following income range:

What is T20 in Malaysia?

T20 represents the top-tier households whose income is higher than RM 10,959. They are further classified into two sub-groups based on the following income range:

Why is it important to understand household income classification in Malaysia?

All the information should come in handy in various situations that apply to managing your finances. Maybe you’re a fresh graduate looking to get smarter with your financial planning and savings. Or, you could be a seasoned employee looking to understand better how inflation and possible unemployment will impact you and your family’s lives.

Likewise, B40 and M40 household income groups qualify for some government aids, facilities, and schemes designed to help alleviate the financial impact of the COVID-19 pandemic. There are different government aids that each group is eligible to apply for.

The B40 groups, for example, can apply for the Bantuan Sara Hidup (BSH) or the Bantuan Prihatin Rakyat (BPR). There are also government housing schemes offered especially for these groups, including the Program Perumahan Rakyat (PPR) and Program Perumahan Rakyat Termiskin (PPRT) for the extreme poor. Lastly, B40 households are automatically eligible for the Skim Peduli Kesihatan or PeKa B40, a healthcare initiative by the Ministry of Health especially designed for the low income groups.

Meanwhile, those in the M40 groups can apply for BSR (those earning below RM 5,000), as well as other assistance covered by programs like the PRIHATIN, PENJANA, PEMERKASA, and PEMULIH.

Finally, this year, the government will also start to reduce the personal income tax by two percentage points for the M40 household income group. The high-income earners in the T20 group, however, will see their tax rates increase by two percentage points. These adjustments will benefit around 2.4 million Malaysian taxpayers and provide them with extra disposable income of RM 1,300. Meanwhile, it will affect less than 150,000 taxpayers earning RM 100,000 - RM 1 million.

Summary

Learning about the Bottom 40% (B40), Middle 40% (M40), and Top 20% (T20) income groups will help you understand your household’s current financial standing. It will also let you know if you qualify for any financial aid that the government provides for certain household income classifications. Certain personal income brackets under the M40 and T20 household groups will also see some income tax rate changes this year, which may affect your disposable income.

Now that you understand these household income groups, you can use this knowledge to boost your financial capabilities, starting with pivoting into a more rewarding career. #SEEKBetter jobs that pay better in the country today, starting with creating or updating your JobStreet profile!

Lastly, check out the Career Resources page for more tips on job searching, self-improvement, and career advancement!