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Decoupling: Does it help you to save on ABSD (Property)

Posted by alan mok on January 30, 2018
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Decoupling: Does it help you to save on ABSD (Property)

What is Decoupling? And does it really help you to save on the Additional Buyer Stamp Duty?

Decoupling is a term more commonly used in Singapore Property Context where ownership of a joint property is being bought by one party which frees the other party to buy his/her “first property” while avoiding paying the Additional Buyer Stamp Duty.

Decoupling: Does it help you to save on ABSD (Property) But is Decoupling the best way to save on ABSD? Well, not necessarily and there are some factors to take into consideration for example, CPF Usage, Loan Matters and Legal Fees.

Type of Property allowed to Decouple

For HDB, you are not allowed to decouple. Part purchase is only allowed if there is a change in the existing family structure (such as divorce, marriage or demise of an owner), or the existing owners need to do an ownership change to retain the flat. For more complete guide please refer to HDB page at http://www.hdb.gov.sg/cs/infoweb/residential/living-in-an-hdb-flat/changing-owners-occupiers/transfer-of-flat-ownership

Decoupling of Private Property is generally allowed without much restriction except for the case when one of the parties is going bankrupt.

Here, we will be looking at how if you decouple a private property;

Decoupling: Part purchase (with loan outstanding)

This is the most common situation and here is the step by step on how to do it (Assuming husband buying wife’s share)

  1. Husband needs to get banker to refinance the total outstanding loan (husband and wife). Husband will have to ensure that his income is able to support the outstanding loan under his name
  2. Husband will need to return all the CPF money with its accrued interest that was used to purchase the property (Wife) to the wife’s CPF account
  3. 2 set of lawyers must be assigned, one to represent seller, the other to represent buyer

CPF Usage and Effects on buying a 2nd Property

In the event where you decide not to decouple and you still wish to use CPF to get a 2nd Property under joint name, then each of you (Husband and Wife) need to set aside the Basic Retirement Sum. The amount depends whether you have reached 55 years old or below, you can check the amount in CPF website at https://www.cpf.gov.sg/members/schemes/schemes/retirement/retirement-sum-scheme

For example: If you are below 55 years old in year 2017, you need to set aside SGD 83,000 (Ordinary Account + Special Account). The excess above 83,000 can then be used for the payment of your new property purchase.

However, should you decide to decouple (assuming Husband bought over wife share), and if CPF involved in their first purchase then wife’s CPF outstanding amount and accrued interest has to be returned. However for the wife next property purchase, she will be able to use all her funds in her OA account for the purchase (treated as her first property)


Property Financing 

Property financing will also be affected by your decision whether to decouple or not. In the event where you decide not to decouple but with 1 outstanding property loan, your next property loan to value maximum amount is capped at 50% (assuming borrow 30 years or max age of 65 years old whichever lower).

However, should you decide to decouple (Assuming husband buying wife’s share) then wife will be able to take up to 80% loan on the next property purchase (TDSR rules apply) while the husband can withdraw more cash from refinancing when buying over wife first property ownership share. This is provided that the husband income can support the balance of the outstanding property loan.

This is also how savy investors are leveraging on the low interest rates from banks to grow their property portfolio.


How does Decoupling affects the Stamp Duty (ABSD and SSD)?

Lets us take a look at the following table for the ASBD Rates;

NationalityFirst PropertySecond PropertyThird and Above
Singapore CitizenNot Applicable7%10%
Singapore PR5%10%10%
Foreginer15%15%15%

From the table you can see the reason why there are an increasing number of decoupling cases. The main objective of decoupling is to save on ABSD required for second/third property purchase.

We will be going through 2 Case studies to help you to understand better;

Case Study 1: Assuming Mr and Mrs Tan currently own a 3 bedroom condo value at SGD 2 million and they intend to purchase another property 1 bedroom at SGD 1 Million. Both Mr and Mrs Tan are Singapore Citizen.

There are 2 scenarios to be considered on their next purchase

  1. Mr and Mrs Tan buy the 2nd property together without decoupling
  2. Mr Tan buy Mrs Tan shares and Mrs Tan buy the next property herself (vice versa)

Scenario 1: Mr and Mrs Tan buy 2nd property together without decoupling

Buyer Stamp Duty = 3% less off $5,400
Additional Buyer Stamp Duty (2nd Property) = 7%
Total stamp duty payable for 2nd Property: 3% + 7% of 1,000,000 minus 5,400 = SGD 94,600

*Both Singapore Citizens and Second Property.

Scenario 2: Mr Tan buy Mrs Tan shares and Mrs Tan buy the next property herself (vice versa)

A. Total stamp duty payable when Mr Tan buys over Mrs Tan share will be: 3% of 1,000,000 (50% share of the 2 million) minus SGD 5,400 =SGD 24,600 *(This shall be Mr Tan first property and as he is Singapore Citizen, there is no ABSD, only the standard BSD)

B. Total stamp duty payable when Mrs Tan buy the new property will be: 3% of 1,000,000 minus SGD 5,400 =SGD 24,600 *(This shall be Mrs Tan first property and as she is Singapore Citizen, there is no ABSD, only the standard BSD)

Total stamp duty payable will be (A+B): 24,600 + 24,600 = SGD 49,200

From this Case Study, you can see that there is much more savings in terms of ABSD should Mr and Mrs Tan decides to decouple and for Mrs Tan to buy the next property herself. 

 

Case Study 2: Assuming Mr and Mrs Tan currently own a 3 bedroom condo value at SGD 2 million and they intend to purchase another property 1 bedroom at SGD 1 Million. Mr Tan is a Singapore PR and Mrs Tan is a Singapore Citizen.

There are 4 scenarios to be considered on their next purchase

  1. Mr and Mrs Tan buy the 2nd property together without decoupling
  2. Mrs Tan buy the 2nd property herself
  3. Mr Tan buys over Mrs Tan shares and Mrs Tan buy the next property herself
  4. Mrs Tan buy over Mr Tan shares and Mr Tan buy the next property himself

Scenario 1: Mr and Mrs Tan buy 2nd property together without decoupling

Buyer Stamp Duty = 3% less off $5,400
Additional Buyer Stamp Duty (2nd Property) = 10%
Total stamp duty payable for 2nd Property: 3% + 10% of 1,000,000 minus 5,400 = SGD 124,600

*Second Property and Mr Tan is a Singapore PR (ABSD is 10%)

Scenario 2: Mrs Tan buy the 2nd property herself

Buyer Stamp Duty = 3% less off $5,400
Additional Buyer Stamp Duty (2nd Property) = 7%
Total stamp duty payable for 2nd Property: 3% + 7% of 1,000,000 minus 5,400 = SGD 94,600

*Second Property for Mrs Tan who is a Singapore Citizen (ABSD is 7%)

Scenario 3: Mr Tan buys over Mrs Tan shares and Mrs Tan buy the next property herself

A. Total stamp duty payable when Mr Tan buys over Mrs Tan share will be: 3% + 5% of 1,000,000 (50% share of the 2 million) minus SGD 5,400 =SGD 74,600 *(This shall be Mr Tan first property and as he is Singapore PR, the ABSD is 5% + the standard BSD of 3%)

B. Total stamp duty payable when Mrs Tan buy the new property will be: 3% of 1,000,000 minus SGD 5,400 =SGD 24,600 *(This shall be Mrs Tan first property and as she is Singapore Citizen, there is no ABSD, only the standard BSD)

Total stamp duty payable will be (A+B): 24,600 + 24,600 = SGD 99,200

Scenario 4: Mrs Tan buy over Mr Tan shares and Mr Tan buy the next property himself

A. Total stamp duty payable when Mrs Tan buys over Mr Tan share will be: 3% of  1,000,000 (50% share of the 2 million) minus SGD 5,400 =SGD 24,600 *(This shall be Mrs Tan first property and as she is Singapore Citizen, there is no ABSD, only the standard BSD of 3%)

B. Total stamp duty payable when Mr Tan buy the new property will be: 3% + 5% of 1,000,000 minus SGD 5,400 =SGD 99,200 *(This shall be Mr Tan first property and as he is Singapore PR, the ABSD is 5% + the standard BSD of 3%)

Looking at the just the total stamp duty payable above for Case Study 2, scenario 2 (Mrs Tan who is Singapore citizen) is the best way to go. Therefore decoupling does not necessarily means that it is the most prudent way to save on ABSD.


Other Factors To Consider for Decoupling 

We have mentioned earlier that, you will need to consider CPF usage and Property Financing when assessing whether you are able to decouple. In addition, seller stamp duty applies if the first property is bought and transferred within the first 3 years.

Transferred within 1st year: 12% (assuming 50% share, it will be 12% of 1 million)

Transferred within 2nd year: 8% (assuming 50% share, it will be 12% of 1 million)

Transferred within 3rd year: 4% (assuming 50% share, it will be 12% of 1 million)

No seller stamp duty payable if transferred after 3 years.

 

Hope you enjoy reading – “Decoupling: Does it help you to save on ABSD (Property)?”. You might also be interested to read more about “New Singapore Condominiums Launching in 2018

This website will be updated as and when new information is available. Please Kindly bookmarked it or  WhatsApp Us @(+65) 90272297 to register interest, so we can update you on the property market in a timely manner.

Disclaimer: This article is meant for research/ information and educational purposes only. All information, especially property ownership laws, are subjected to changes and no responsibility shall be held on the accuracy. All sorts of property investments can be risky and investors are expected to perform their own due diligence before committing into any purchase.

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