ABSD Saving (Decoupling &Trust Purchase)
How Does ABSD impact you?
A Singaporean couple, are looking to buy a second property valued at $1 million. They are worried about the Additional Buyer's Stamp Duty (ABSD). In Singapore, when purchasing a second residential property, Singaporeans need to pay 20% ABSD on the property's purchase price.
ABSD Concern: They are worried about the Additional Buyer's Stamp Duty (ABSD). In Singapore, when purchasing a second residential property, Singaporeans need to pay 20% ABSD on the property's purchase price.
Calculation: For their $1 million property, the ABSD would amount to $200,000 (20% of $1 million). This is an additional cost they need to consider in their budget.
Contact our experts to discover potential strategies for reducing or avoiding ABSD!
Decoupling
Decoupling refers to the procedure where one of the co-owners of a property transfers their ownership share to the other co-owner, typically occurring in situations where a property is jointly owned by two individuals. This means they can buy another property without having to pay Additional Buyer's Stamp Duty (ABSD).
This process involves the person buying all the remaining shares of the property from their partner. A legal agreement, known as the sale and purchase (S&P) agreement, outlines all the details. A lawyer or conveyancer usually drafts this agreement.
To complete the process, the buyer pays the seller for their share of the property as stated in the S&P agreement and also pays the Buyer's Stamp Duty (BSD) to the Inland Revenue Authority of Singapore. The proceeds are used to settle any existing mortgages, CPF (Central Provident Fund) used, and Seller's Stamp Duty (SSD) before transferring ownership to the buyer.
Trust Purchase
Parents can buy property for their children below 21 years old and hold it in trust, allowing the child to own the property. This is often used for tax planning and inheritance purposes.
Buying property through trusts usually requires substantial cash. It's a choice for those with significant financial resources aiming for inheritance or tax planning.
Steps to Buy Property in Trust:
Set up a trust with a trust deed, clearly defining beneficiaries, trustees, powers, and beneficial interest.
Property in trusts must be fully paid in cash; CPF funds and bank loans cannot be used.
ABSD (Trust) Impact: The Singapore government imposed a 65% Additional Buyer's Stamp Duty (ABSD) on residential property transfers into living trusts. Trustee can seek a refund from IRAS if conditions like identifiable beneficiaries and irrevocable trusts are met. The refund is based on the difference between the 65% ABSD rate and the applicable ABSD rate for the beneficiary with the highest rate.
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Case 1 : Couple owns 2 properties. Buying 3rd property
The Singaporean couple, each owning a private property, desired a 2-bedroom home in Woodleigh. With our expert guidance, they utilized a loan against their existing properties. The strategic move involved purchasing the new property under a trust for his son. This not only secured them a private property in an ideal location but also resulted in substantial tax savings. Our professional advice made their dream home a reality while optimizing their financial strategy.
Today , the family owns 3 properties in Singapore
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Case 2 : Owners of EC purchase 2nd private property
Mr. and Mrs. Tan currently owns a Executive Condominium (EC) in Tampines and were interested in acquiring another private property . Mrs. Tan, is not keen to sell their current EC and aimed to minimize incurring Additional Buyer Stamp Duty (ABSD).
During our consultation, we carefully evaluated their financial standing and took the time to understand their specific needs and goals. Subsequently, we provided them with a comprehensive overview of market trends, data analysis, potential opportunities, and crucially, an assessment of risks and safety measures.
After our discussion, Mr. and Mrs. Tan gained confidence in their decision. They opted for a strategy that involved decoupling their existing property while simultaneously purchasing their next private property.
Today , Mr and Mrs Tan own 2 private properties
