Decoupling to reduce or avoid ABSD: Costs, Savings & Potential Pitfalls
https://propertynet.sg/decoupling-reduce-avoid-absd/
Case Studies (based on applicable ABSD after 5 July 2018)
Now that we have established the costs and savings involved in decoupling, we can now look into the process of assessing if decoupling will help our client, Mr and Mrs Tan in reducing their cost in purchasing their 2nd property.
Mr Tan is a Singaporean and Mrs Tan is a Singapore Permanent Resident. They currently own a 3-Bedroom condo (3BR) under joint-tenancy and is looking to buy a 1-bedroom apartment (1BR) for investment. Their 3BR has an estimated value of SGD 2 million, and the one bedroom condo at SGD 1.2 million.
Scenario 1: Mr Tan & Mrs Tan proceeds to purchase the 1BR without decoupling
They would have to pay Additional Buyer Stamp Duty of SGD 120,000 on the acquisition of the 1BR. The Buyer Stamp Duty would be SGD 32,600. The total stamp duty payable would be SGD 152,600 if they were to buy the 1BR without decoupling.
Calculation:
ABSD: SGD 1,200,000 X 15% = SGD 180,000
BSD: SGD 1,200,000 X 4% SGD 15,400 = SGD 32,600
Total Stamp Duty Payable = SGD 120,000 + SGD 32,600 = SGD 212,600
Scenario 2: Without decoupling, Mr. Tan buy the 1BR (himself only)
By buying the 1BR without decoupling and Mrs. Tan, Mr. Tan would be paying ABSD of SGD 144,000 (12% ABSD applicable for Singaporean buying his/her 2nd property) and BSD of 32,600. The total stamp duties payable is SGD 176,600.
Scenario 3: Mr Tan takes over the 3BR & Mrs Tan buy the 1BR
By taking over 50% of Mrs Tans share of the 3BR, Mr Tan has to pay the Buyer Stamp Duty of SGD 24,600.
Calculation:
BSD: SGD 1,000,000 X 3% SGD 5,400 = 24,600
After decoupling, Mrs. Tan is liable to pay ABSD of SGD 60,000 and BSD of SGD 32,600.
Calculation:
ABSD: SGD 1,200,000 X 5% = SGD 60,000
BSD: SGD 1,200,000 X 4% SGD 15,400 = SGD 32,600
With decoupling, having Mr. Tan takes over the 3BR and Mrs. Tan buys the 1BR, the total stamp duty payable is SGD 117,200.
Scenario 4: Mrs Tan takes over the 3BR, and Mr Tan buys the 1BR
If Mrs Tan were to take over the 3BR, the buyer stamp duty payable is SGD 24,600 and ABSD payable is SGD 50,000.
Calculation:
BSD: SGD 1,000,000 X 3% SGD 5,400 = SGD 24,600
ABSD: SGD 1,000,000 X 5% = SGD 50,000
As for Mr. Tan buying the one bedroom condo, he has to pay buyer stamp duty of SGD 30,600.
Calculation:
BSD: SGD 1,200,000 X 4% SGD 15,400 = SGD 32,600
The total stamp duty payable in this case will be SGD 107,200.
Recommended Course of Action
By decoupling and having Mrs Tan taking over the 3BR and Mr Tan buying the 1BR, they would pay the minimum amount of SGD 107,200 in stamp duties if they choose scenario number 4. Hence, it is advisable for Mr Tan and Mrs Tan to perform decoupling to acquire their 2nd property.
Total Stamp Duty Payable for:
Scenario 1: SGD 212,600
Scenario 2: SGD 176,600
Scenario 3: SGD 117,200
Scenario 4: SGD 107,200
