Since April 2016, married couples who own a HDB flat are not allowed to decouple. At the moment, the Additional Buyer’s Stamp Duty (ABSD) of 20% is imposed on secondary home purchases for Singaporeans citizens. But this doesn’t apply in the case of an essential occupier.
Considering essential occupiers are not regarded as homeowners, once they complete the Mandatory Occupation Period (MOP), they would be considered first-time property owners when buying a private property. The title of essential occupier also entitles one to take up a 75% loan on their next property, as opposed to the 45% limit imposed on individuals wishing to purchase their second property.
In this simple blog, we examine some of the mistakes people make when Decoupling Property Singapore.
Mistake 1: Intestate Succession Act
For the vast majority, succession planning is a matter that many of us consider only as we approach our golden years. For those who might already know, a lack of planning means that your assets will be subject to the Interstate Succession Act- this is a process of allocating your proceeds to your family members in the absence of a will.
The Interstate Succession Act prioritizes family members in accordance with 9 tiers, equally dividing assets where need be. Spouses are allocated first, followed by children, then the deceased’s parents.
Mistake 2: Ownership Structure
In a typical manner of holding, ownership weightage can vary between 1/99 or 50/50. There’s no secret formula here for the most optimal payment structure, but it would be natural to adopt the structure that maximizes cash flow to that family unit.
You should take it upon yourself to weight benefits and limitation of different ownership structures and calculate which weightage will offer the best cash flow outcome. In so doing, you can immediately minimize your cash outlay and the exiting party can focus on maximizing funds for their next property purchase.
As we conclude, Decoupling Property Singapore should never be used to hide the true beneficiary of ownership just to avoid tax. For this reason, you need to always align structure with substance.
Remember, Decoupling Property Singapore is not a straightforward process and calls for careful consideration of the processes and additional costs involved. Even when all rational steps have been taken across documents and excel sheets, it is also essential to plan for the worst-case scenario, to protect all that you have worked so hard to achieve!