Get the sums right before 'decoupling' to buy property
PublishedFeb 11, 2018
Transferring one co-owner's share of home to the other to save on ABSD for another property may not be beneficial always
When I moaned to a real estate agent friend that the Additional Buyer's Stamp Duty (ABSD) was deterring me from buying another property, she suggested decoupling - and no, I'm not talking about breaking up my marriage.
Decoupling involves one spouse legally giving up his or her co-owner status to become an authorised occupier.
Many home owners who wanted to reduce the amount of ABSD they have to pay have opted for this approach since the tax was introduced in 2011.
Decoupling happens when one partner's share in a property is transferred to the other person. This creates a sole owner, leaving the other half of the pair free to buy another home without having to pay the ABSD, as that purchase will be seen as his or her first. The savings can be substantial.
This practice caught on after January 2013, when Singaporeans had to start paying ABSD from their second property, instead of the third - a change introduced to cool a heated property market.
This means a Singaporean buying a second home is levied ABSD of 7 per cent, while permanent residents (PRs) pay 10 per cent. If the unit is a third property, the ABSD goes up to 10 per cent for Singaporeans but stays at 10 per cent for PRs.
Industry observers said this prompted property agents to start raising the notion of decoupling, as my agent friend did with me.
Ms Lie Chin Chin, managing director of local law firm Characterist, says her legal firm has handled more than 250 decoupling cases since 2012. The recent upturn in the private residential market has sparked an increase in demand.
But decoupling is not for every home owner as circumstances vary. Ms Lie and fellow lawyer Ang Kim Lan, who is a director at Goodwins Law Corporation, say that I should work out my sums first. There must be net savings out of the decoupling exercise, which means the ABSD saved should exceed the cost of decoupling.
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