7th of the month.
Payday.

Your admin knocks on the door.
“Boss, site workers’ salary, same as usual ah? Cash?”

You don’t even look up.

“Cash lah. They prefer. Faster.”

Simple, right?
Not really.

Budget 2027 was tabled on 9 October 2026.
One line inside may change how you pay your people.

From YA 2028, if your company is not an MSME, salary may only be deductible if it is paid through a financial institution or an approved cashless payment instrument.

So the same salary may now score differently:

Bank transfer … Deductible, if the usual conditions are met.
Approved cashless … Deductible, once LHDN confirms what is “approved”.
Cash in envelope? … Maybe 0%.

“Boss, but the salary is real what. Got payslip. Got EPF.”

Yes.
Today, under Section 33(1) of the Income Tax Act 1967, that is enough.
How you pay has never been a condition.

From YA 2028, it may be.
The government says it is about transparency and traceability of payroll.

Welcome to Malaysian tax. 😂

“Boss, we are small company. Sure not affected one.”

Don’t happy too early.

MSMEs are excluded.
But you may not be an MSME.

Singapore partner owns 30% of your shares?
Not MSME.

Your company sits under a bigger group?
Maybe not MSME.

Gross business income above RM50 million?
Not MSME.

(This follows the MSME definition used for the SME tax rate. The Budget has not yet confirmed which definition applies.)

“OK lah boss, 2028 still far.”

Is it?

If your year end is 30 June, your YA 2028 basis period starts 1 July 2027.
That is less than nine months from now.

Now the numbers.

RM40,000 cash wages a month.
RM480,000 a year.
At 24% corporate tax, up to RM115,200 more tax.
In one year.

Same recap:

Bank transfer … Potentially 100%.
Approved cashless … Wait for LHDN.
Cash envelope? … Maybe 0%.

This is why the real tax issue is not the salary.
It is how you pay it.

So please don’t put:
Cash envelope.
“Last time also like this one.”
“Later we settle.”
under: Payroll.

For SME owners, the solution is simple.

List.
Check.
Open.
Transfer.

List who is still paid in cash.
Check your MSME status and your year end.
Help staff, including foreign workers, open bank accounts.
Transfer everything, bonus and allowance included.

One more thing.
This is still a Budget proposal. The Finance Bill and LHDN guidelines will confirm the final rules.

But your payroll habits take months to change.

Same worker.
Same salary.
But from YA 2028, bank in or cash may change everything.