By decoupling, one party will take over the full ownership of the existing property, and the other party is “freed” to purchase another property at zero/reduced ABSD.
But decoupling does not always make economic sense.
In this article, we will go through the costs and savings incurred during decoupling, followed by an example assessing if decoupling makes economic sense for a couple planning to buy a second property.
For the purpose of this article, “Seller” refers to the individual transferring or selling the shares of the existing property to the other owner. The other owner taking/buying over the shares will be called the “Buyer”.
Prerequisites for Decoupling
Before you decide if decoupling works for you, you need to assess if you can perform decoupling.
Type of Property
HDB
Decoupling (or as HDB terms it, resale part-share) is no longer allowed for married couples since 2016.
The resale part-share is allowed for the transfer of flat ownership between parents and children or buying over of ex-spouse’s share. If you would like to find out more, you may refer to this article: Change or Transfer of HDB Flat Ownership Within Family Members.
Otherwise, if you have yet to commit to a BTO or HDB resale purchase, you may designate one spouse as the owner and the other as the essential occupier to enable “decoupling” of your HDB in future.
Private Residential Property
In general, decoupling is allowed on the private residential property without much restriction. A case where decoupling may not be allowed is when one of the parties is going bankrupt.
Utilisation of CPF
Very often, CPF is used to finance a property purchase (including private property).
When CPF is utilised to buy and finance the existing property, after selling or transferring of shares of the current property, the CPF monies used (including accrued interest) have to be returned to the CPF account of the “Seller”. The shortfall in the funds returned to CPF will be settled by the sales proceed.
For “Seller” whose age is 55 and above, the monies refunded from the “sale” of your earlier property will be used to meet your Full Retirement Sum in your Retirement Account (RA). And only the remaining monies in your Ordinary Account (OA) can be used to purchase your next property.
Details can be found here: https://www.cpf.gov.sg/Members/Schemes/schemes/housing/private-properties-scheme
Outstanding Mortgage
The “Buyer” have to finance the balance mortgage by himself/herself based on her income if there are outstanding loans on the existing property.
Seller Stamp Duty
If the “Seller” transfers the property within four years of the purchase, he/she is liable to pay the Seller Stamp Duty.
Costs & Savings of Decoupling
Buyer Stamp Duty
The “Buyer” has to pay the Buyer Stamp Duty when taking over the shares of the property from the “Seller”.
Why not transfer the shares over at a very low price to minimise the Buyer Stamp Duty?
You will be very disappointed.
The Buyer Stamp Duty is calculated based on the agreed purchase price or value of the property, whichever higher.
| Payment Schedule | % of Stamp Duty |
|---|---|
| First S$180,000 | 1% |
| Next S$180,000 | 2% |
| Next S$640,000 | 3% |
| Remaining Amount | 4% |
Legal Fees
Two sets of legal fees will be payable.
The “Buyer” has to pay for his/her conveyancing fees.
The “Seller” has to engage a separate legal firm to handle the transfer/sale of his share of the existing property to the “Buyer”.
Additional Buyer Stamp Duty
After decoupling, the “savings” would be the reduced/zero ABSD payable by the “Seller” when he/she purchase the next property.
The ABSD which would be payable when the “Seller” buys his 2nd property without decoupling is as followed:
Rates on or before 5 July 2018
Note: There will be a transitional provision for cases where an Option to Purchase (OTP) has been granted by sellers to potential buyers on or before 5 July 2018, and this OTP has not been varied on or after 6 July 2018. For such cases, the current ABSD rates, instead of the revised ABSD rates, will apply if the OTP is exercised within 3 weeks of this announcement (i.e. exercised on or before 26 July 2018) or the OTP validity period, whichever is earlier.
| Buyer's Citizen Type | Rate of 1st Property Purchase | 2nd Property Purchase | 3rd and subsequent Property Purchase |
|---|---|---|---|
| Singapore Citizen | Not Applicable | 7% | 10% |
| Singapore Permanent Resident (SPR) | 5% | 10% | 10% |
| Foreigners & Non-Individuals | 15% | 15% | 15% |
Rates on or after 6 July 2018
| Buyer's Citizen Type | Rate of 1st Property Purchase | 2nd Property Purchase | 3rd and subsequent Property Purchase |
|---|---|---|---|
| Singapore Citizen | Not Applicable | 12% | 15% |
| Singapore Permanent Resident (SPR) | 5% | 15% | 15% |
| Foreigners | 20% | 20% | 20% |
| Entities | 25% | 25% | 25% |
| Developer | Remittable 25% + Non-Remittable 5% See footnote1 | Remittable 25% + Non-Remittable 5% See footnote1 | Remittable 25% + Non-Remittable 5% See footnote1 |
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 180,000 on the acquisition of the 1BR. The Buyer Stamp Duty would be SGD 32,600. The total stamp duty payable would be SGD 212,600 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 180,000 + 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 Tan’s 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
What are the potential pitfalls in “decoupling”?
Assuming that Decoupling is the Best Method
Decoupling does not always end up with the minimum duties payable.
In the case of Mr and Mrs Tan, if the 1BR costs SGD 700,000. The best option is to purchase under Mr Tan’s name without decoupling.
In general, decoupling makes economic sense when buying a second property which has a higher value than the 1st property. Or in cases where the value of the 1st and 2nd property is close to each other.
Regardless, it is best to get a professional to help you determine if decoupling saves you money.
Calculating the Stamp Duty Wrongly
Very often, mistakes are made in the calculation of the stamp duties payable. You can familiarise yourself with the stamp duties payable by reading this article: What is Buyer Stamp Duty and Additional Buyer Stamp Duty?
And when mathematics is not your cup of tea, it is better for you to seek professional help.
Also, do take note that the seller stamp duty is payable if the transferred of shares of the property is within the holding period of 3 years.
Bankruptcies
The problem will arise if the transferor becomes bankrupt within 5 years from the date of transfer. The creditor may have the right to seize the transferred shares of the property.
Mortgage Loan
There are some risks that the bank may not be keen to grant the loan after “decoupling”. However, this risk can be easily mitigated by first approaching the bank to seek their financial support before performing the transfer.
Conclusion
Before you proceed to “decouple”, it is wise to spend some time to work out the different scenarios and assess which scenario works best for you. You may want to get yourself familiarise with the stamp duties payable (namely, buyer stamp duty, additional buyer stamp duty & seller stamp duty) when buying and selling the properties. Other fees where you may want to take note of are legal fees, agent’s fee, mortgage stamp duty, CPF legal fee and valuation fees.
Once again, we hope this article would be useful to you. As always, if you have any feedback or require help to determine if decoupling works for you, just drop us a note at hello@52.221.194.137 or via the contact form below. Our trained staff will be happy to assist you.
- Cashing out your property without selling it.
- How much cash is needed to buy your 1st and 2nd property in Singapore?
- What is ABSD and how it affects you?
- List of Private Condominium from Developers
- TDSR and LTV: What are they and how they affect you?
Useful Tool (Free): ABSD Calculator
Edwin Goh
With his love for numbers and data, Edwin has provided valuable insights to his clients and readers to empower them to make better-informed real estate decisions.
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My husband and I currently owned a landed property (joint tenancy) valued at 2,000,000 Singapore Dollars. We are both Singapore Citizens, and have no other properties. We are intending to buy a private condominium unit (budget 1,000,000 Singapore Dollars).
By decoupling (assume my husband takes over ownership of landed property and I buy the new condo unit)
Husband : BSD on 50% of 2,000,000 = 24,600
Me : BSD on condo = 24,600
Total duties = 49,200
If we proceed to buy the condo unit together
ABSD = 120,000
BSD on condo = 24,600
Total duties = 144,600
Are my calculations correct?
correct
I think the answer is correct. Is that right?
Hi Edwin,
I’ve the same question as Lionel and additional question. Could you advise?
1) If MR A and MRS A chose 99-1% Tenancy-in-common when purchasing the EC, and they decided to decouple and buy another condo 5 years later, am i right to say that the BSD and ABSD that MR A has to pay is only valued at 1% of the house price?(ie, if the unit cost 1,000,000. the 1% value will be 10,000. Hence BSD + ABSD is base on 10,000 only? After MRS A sell the 1% shares, meaning that she can own the new condo without paying ABSD?
2) If MR A and MRS A chose 99-1% Tenancy-in-common when purchasing the EC, and they decided to sell the EC 5 years later, how will the distribution of the money be? is it 99% to MR A and 1% to MRS A? if so how will MRS A put back her CPF portion? will the 99% be (MR A’s CPF + cash?) then MR A will need to pass cash to MRS A to put back her CPF portion?
3) Decoupling would be the best method if the couple are buying a property valued more then the current property?
1) If MR A and MRS A(both SC) chose to purchase an EC under Joint-Tenancy, and they decided to decouple to get another condo 5 year later, am i right to say that they have to change their scheme from Joint-Tenancy to Tenancy-in-common(with legal fee) before MRS A can sell her 50% shares to MR A? i understand that this will require BSD from MR A. Does buying this 50% require ABSD too? since eventually MR A will only be having 1 property in SG.
2) If MR A and MRS A chose 99-1% Tenancy-in-common when purchasing the EC, and they decided to decouple and buy another condo 5 years later, am i right to say that the BSD and ABSD that MR A has to pay is only valued at 1% of the house price?(ie, if the unit cost 1,000,000. the 1% value will be 10,000. Hence BSD + ABSD is base on 10,000 only?
3) If MR A and MRS A chose 99-1% Tenancy-in-common when purchasing the EC, and they decided to sell the EC 5 years later, how will the distribution of the money be? is it 99% to MR A and 1% to MRS A? if so how will MRS A put back her CPF portion? will the 99% be (MR A’s CPF + cash?) then MR A will need to pass cash to MRS A to put back her CPF portion?
Please advise.Thanks
adding on, reference to the guide from IRAS, point 7.2, ABSD is not applicable for the purchase of additional shares in the same property.
Purchase of Additional Partial Interest in the Same Property
7.1 Where the owner already owns a partial interest in a property, the ABSD rate applicable for the acquisition of additional interest in the same property will depend on the number of properties he already owns at the time of the acquisition.
7.2 Hence if a SC only owns a partial interest in one property, his acquisition of additional share in the same property would not be subject to ABSD. If he already owns partial interests in both property A and B, his acquisition of additional share in property A or B or both would be subject to ABSD rate of 7% as he owns 2
properties at the time of the acquisition of additional interest.
7.3 If a SPR only owns a partial interest in one property, his acquisition of additional interest in the same property would be subject to ABSD at 5%. If he already owns partial interests in both property A and B, his acquisition of additional share in property A or B or both would be subject to ABSD rate of 10% as he owns 2
properties at the time of the acquisition of additional interest.
Good one Lionel! I read until blur ki initially. ABSD in the example still computed on the transferred portion which is not correct as the transferee/buyer already owns a partial interest.
So decoupling is still the best and cheapest way to go for couples who want to buy 2nd property irregardless of the 4 scenarios.
Hi Edward,
ABSD (if applicable) will be computed on the transferred portion. If you need further clarification, please call us at 61001344.
Regards,
Edwin Goh
Hi Lionel, have you received the email we send to your email address? If any case, if you may call us at 61001344 and our staff can assist you on your questions.
Hello Edwin, i did not receive any email from your team. Is it possible for them to send me again?
And can i confirm that ABSD will still be applicable? cox that is not what i inferred from point 7.2.
Please advise thanks!
Hi Lionel,
You may refer to your clause 7.1 which states that “Where the owner already owns a partial interest in a property, the ABSD rate applicable for the acquisition of additional interest in the same property will depend on the number of properties he already owns at the time of the acquisition.”. The key is “number of properties he already owns at the time of acquisition.”
However, if you are still in doubt, you may contact your legal advisor for further clarification.
For the rest of the questions, you may call us at 61001344, our staff will be able to assist you.
Regards,
Edwin Goh
Hi Edwin,
Me and my husband are planning to buy a landed property while selling our residential condominium. If we manage to sell our home within 6 months from the sale completion of the newly purchased house, do we get our refund back on the additional 7% stamp duty when we pay for the purchase the landed property?
Many thanks for your advice.
Hi Maggie,
You would be able eligible for ABSD remission. You may follow this link https://www.iras.gov.sg/irashome/Other-Taxes/Stamp-Duty-for-Property/Claiming-Refunds-Remissions-Reliefs/Remissions/Remission-of-ABSD-for-A-Married-Couple/ for the details on the eligibility and application process.
As a side note, it would be good for you to start marketing your residential property while looking for a suitable landed property. The market is rather slow for the resale market for the private condominium. We have seen cases where people have purchased their second property and having a hard time selling their previous property. As a result, they passed their deadline for ABSD remission.
Hope I have answered your question. Good Luck.
Hi, I have purchased a HDB flat. I need to do decoupling because I own private property with my parents. We buy the private property with cash with out any loans. If I decoupling to buy HDB. What is the procedure? What is the ABSD? What is legal fee?
Hi Glen,
I am a bit confused at the current position you are at. Have you purchased the HDB or have purchased the HDB? Nonetheless, the usual procedure is to decouple first before getting your HDB. It may be workable the other way if you have sought approval from HDB with valid reasons. Also, if you are getting a new HDB flat (i.e. BTO), you may want to check with HDB your eligibility to purchase as the rule is that within the 30 months you disposed your private property, you may not purchase a new flat. However, I would assume that your name was added to private property initially due to some valid reason, so HDB may approve you buying the HDB despite you disposing of the private property in that 30 months holding period.
For the ABSD, no ABSD is payable by you. However, if your parents hold a 2nd or 3rd property in their name, they may be subjected to ABSD.
The legal fee for “part-sale” is approximately $2,500 to $3,000. The legal fee of approximately $2,500 to $3,000 is also applicable for your parents who are purchasing your shares.
A private property is currently jointly owned by 3 foriegners. I’m a SC and I would like to buy over 2 person of their shares. This will be my first property. Do I need to pay ABSD beside the BSD? If still need to pay, how many percentage of stamp duty will be incurred?
Hi Lin Lin,
No ABSD will be payable as this is considered your first property.
Regards,
Edwin
My husband owns 3 properties, 1 on his own and 2 residential shared with me.
I wish to decouple both my properties (1 held in tenancy in common and the other 50%-50%) to him and I would like to know if there is any ABDS incurred.
There will be ABSD incurred by transferring the shares of the two residential properties to your husband, regardless if it is held in “Tenancy-in-common” or “Joint-Tenancy”.
And the ABSD payable will be 7% for the first property transferred to him and 10% for the 2nd property transferred to him.
I have assumed that the property owned by himself is a residential property and he is a Singaporean.
If you would like to discuss in details, please write to us at hello@52.221.194.137 with your contact details. We can schedule a call with you to assist you further.
Is it possible to change from joint tenancy to tenancy in common for married couple both are SC?
Hi, you can do the change with assistance from your lawyer if the property is not a HDB.
what if :
Ms Tan is SC
Mr Lim is foreigner
they bought the property 6 years ago.. and current value 2mil
If Ms Tan sells her 50pct share to Mr Lim..
Does Mr Lim now has to pay, apart from the 3pct stamp duty, also BSD as a foreigner? though his own 50pct bought previously, there was no such ABSD..
Mr Lim, as a foreigner, has to pay the Buyer Stamp Duty of 3% and Additional Buyer Stamp Duty of 15%.
The transfer of shares is considered “part” sales of the property. In the case of Mr Lim, he is purchasing “part” of the property. ABSD is applicable at the date of purchase of the “part” property.
Scenario 2: Without decoupling, Mr. Tan buy the 1BR
By buying the 1BR without decoupling and Mrs. Tan, Mr. Tan would be paying ABSD of SGD 84,000 and BSD of 30,600. The total stamp duties payable is SGD 114,600.
How did you get the 84k?
As Mr Tan is holding onto the 1st property, and buying a 2nd property under his name. He is subjected to ABSD of 7%. So, this will work out to be SGD 84,000 (7% of SGD 1,200,000).