Malaysia to adopt net disposable income approach for aid assessments from 2027

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2027 disposable income approach

Highlights

The Malaysian government will implement a net disposable income (NDI) approach as the basis for assessing household aid eligibility from 2027.
According to the 2024 Household Income Survey, the M40 group earns RM5,860–RM12,679 a month, with nearly 70% spent on basic costs such as food, housing and transport.
The M40 income range rose from RM5,250–RM11,819 in 2022 to RM5,860–RM12,679 in 2024, with a new survey scheduled for 2027 and its findings to be published in 2028.

This article was translated from the original. Read the original version by our correspondent here.

2027 rollout and fiscal pilot project

As reported by The Edge Malaysia, Deputy Economy Minister Datuk Seri Mohd Shahar Abdullah said the net disposable income approach, or NDI, is planned for adoption in 2027 as a fairer way to assess household finances.

He said policymaking cannot rely solely on gross income estimates, as a more accurate assessment needs to account for basic expenses and socio-demographic factors. The Ministry of Economy is currently in discussions with relevant agencies to run a pilot project and understand the impact of applying the NDI approach on the country's fiscal position, he said.

In response to a supplementary question in the Dewan Rakyat, he said the government wants to ensure that policy implementation covers not only low-income groups but the full spectrum of Malaysian society. While the new methodology is being finalized, the government is also introducing measures through Budget 2027 to ease the burden on the public, including middle-income groups, in areas such as housing, education, healthcare, taxation and wages.

Pressure on the M40 and policy implications

According to the 2024 Household Income Survey by the Department of Statistics Malaysia, the middle 40% group, or M40, had monthly gross income of between RM5,860 and RM12,679, with an average of RM8,744 a month. Mohd Shahar said nearly 70% of M40 income is spent on basic costs, comprising 22.7% on housing and utilities, 34.1% on food and 10.6% on transport.

He said the income left at the end of the month becomes very small after medical insurance commitments are taken into account, reinforcing the case for assessing aid eligibility based on actual disposable income. While the new approach is pending, some forms of government assistance have already begun shifting to a broader-based approach, including Budi5 and early schooling assistance, which benefit Malaysians generally, including middle-income groups.

On the income thresholds for the B40, M40 and T20 groups, he explained that the limits are adjusted based on household income and expenditure surveys conducted twice during each Malaysia Plan. The M40 income range rose from RM5,250 to RM11,819 in 2022 to RM5,860 to RM12,679 in 2024, while the next survey will be conducted in 2027, with its findings published in 2028.

In our previous coverage of Malaysia's target to lower the deficit fiscal to below 3% of GDP, we explained how fiscal consolidation and targeted subsidy reforms are seen as crucial to creating fiscal space and strengthening economic resilience. We also highlighted the role of system digitalization in improving the accuracy of aid targeting, while noting that meeting the deficit target depends on revenue collection, more efficient subsidy mechanisms and factors such as oil prices and social spending pressures.

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