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6 Key Factors to Consider If Decoupling Your Private Property in Singapore Is The Right Choice For You


A married couple in Singapore wondering if decoupling their private property in Singapore is the right choice to make

Do you currently own a private property (condo or landed property) with your spouse, want to purchase a 2nd private property but do not wish to incur the Additional Buyer Stamp Duty (ABSD)? Then you are definitely at the right place.


Today’s article aims to shed light on those that currently co-own a private property with their spouse and are exploring whether decoupling your private property in Singapore is the right choice for you to take. Some of you may even be wondering if it would be a better idea to sell off the whole property instead of carrying out decoupling.


In this article, we shall cover the key implications of decoupling and the 6 key factors to consider first before deciding if decoupling your private property is the right choice for you and your spouse.



The definition and the meaning of decoupling a property in Singapore

Meaning of Decoupling

Let us first understand what decoupling means.


Decoupling is a widely known term and has been executed by many private property owners in Singapore before. In short, the meaning of decoupling is to simply sell the shares that you have in your current private property in Singapore to your other co-owner(s).


By doing so, it will “free up” your name in your current private property, and you will be able to purchase another property on your own as your first property and without the Additional Buyer Stamp Duty (ABSD), which is imposed on buyers for their second property onwards.

 


The "99-to-1" Property Scheme

Before we dive into the details of decoupling, we just want to highlight that there had been some controversies being highlighted by the taxman last year in April 2023 – 99-to-1 property scheme: IRAS conducting regular audits to uncover “contrived or artificial” arrangements, which had caused some panic and misconceptions amongst current and aspiring private property owners.


Just to provide readers with more context and clarity here, the "99-to-1" property scheme that IRAS was referring to back then was not about decoupling, but rather of a particularly unique situation whereby a first time buyer purchases a private property on his own, goes on to exercise the Option to Purchase/Sales and Purchase agreement and pays for the Buyer Stamp Duties as a first-time property owner.


But subsequently within an extremely short span of time, decides to sell 1% of his property shares to another party who already owns an existing property. The other party therefore had only paid ABSD on 1% of the property value. This is not allowed as buyers who have existing properties, must pay ABSD on the full 100% property value even if they only have a partial interest in their next property.


Long story short, as you can tell decoupling is of an entirely different context here.


A Singaporean married couple wondering if they should pay ABSD or do decoupling to purchase a 2nd property without ABSD

6 Key Factors to Consider If Decoupling Your Private Property in Singapore Is The Right Choice For You

Now, let us dive right into the 6 key factors to consider if decoupling your private property in Singapore is the right choice for you.


No. 1: Did you all embark on the right percentage allocation from the start?


Back then when you both first purchased the private property together, you might have been advised by your friends or property agent to allocate the percentage shareholdings in your private property as 99-to-1, as this can help you all to save on the Buyer Stamp Duty (BSD) should you decide to decouple one day as you will only need to pay Buyer Stamp Duty (BSD) on 1% of the property value.


However, this might not have been the best form of percentage allocation for you and your spouse from the onset.


The reason being the 1% shareholder has to refund all the CPF and accrued interest that they have contributed to the property back to their own CPF when selling their shares to the remaining owner.


Should the 1% shareholder have utilized a substantial amount of CPF, then decoupling your property might not be such an ideal route to take; which takes us to point no. 2.



No. 2: Does the one selling their share have enough to refund back to their own CPF OA plus accrued interest?


As with any selling transaction, the one who is selling their share will have to refund the CPF OA plus the accrued interest that they have utilized in the house from their selling price.


Here are 2 examples:


Should you have only taken a 1% shareholding from the beginning and currently the property is valued at $2 million, your selling price will only be worth $20,000. In this case, should you have used $250,000 worth of CPF OA plus accrued interest, you will be required to refund $230,000 back into your own CPF OA account using your own cash.


However, should you have taken a 50% shareholding right from the beginning with the same valuation of $2 million, your selling price will therefore be worth $1 million. In this case, it will be sufficient to cover back your own CPF OA and accrued interest without you having to fork out extra cash.


In the first scenario, should you still decide to proceed using your own cash, this is still possible; but it will greatly reduce the amount of capital that you can inject into the next property purchase.



Running through the decoupling calculations of a private property in Singapore

No. 3: Does the one buying over the share of the other have sufficient income?


Let us assume another scenario here where the percentage shareholding allocation between both spouses is 50–50, and that there is an existing bank loan in the current private property.


The one who is buying over the share of the other will have to refinance their own portion of the existing loan and at the same time, take up a new loan to buy over the selling party’s share.


Therefore, the one who is buying over the share of the other will have to have sufficient income proof to be able to take on the total overall loan amount on his/her own. This therefore requires an in depth working calculation to see if decoupling is even viable in the first place.


No. 4: Does the one buying over the share of the other have extra CPF in their current OA account?  


Using the same scenario as the one above, should the one who is buying over the share of the other have insufficient income to take over both loans – the refinancing of their own portion and the new loan, then the buyer may have to utilize extra cash or CPF to reduce the overall loan amount.


This therefore also affects the possibility of carrying out decoupling and the numbers will have to be ran first to see if it is a viable route to take.


Do reach out to us for a comprehensive consultation should you require help planning out the numbers and to see if the decoupling route would be suitable for you and your spouse.


Paying Buyer Stamp Duties (BSD) and legal fees for decoupling a private property in Singapore

No. 5: Are you all agreeable to paying Buyer Stamp Duties and Legal Fees for decoupling?


As there is a buying and selling transaction involved here between two parties, Buyer Stamp Duties and legal fees are unavoidable.


Therefore, the one who is buying over the share of the other will be required to pay Buyer Stamp Duty (BSD) on the value of the percentage of the property owned by the selling party during decoupling.


So, for example, if the property is valued at $2 million and if you both are on a 50–50 percentage allocation, the Buyer Stamp Duty (BSD) will be payable on $1 million.


Legal fees for decoupling will be higher than usual as well due to there being 2 sets of transactions being carried out at the same time here. An estimated amount for the legal fee ranges from between $5500 to $6500 on average.


No. 6: The one who is buying over the share will be subjected to Seller Stamp Duty (SSD) should you all decide to change your mind and to sell in the next 3 years after decoupling


And last but not least, the decision to decouple your property today will affect you for the next 3 years.


What we mean by this is that the moment the decoupling transaction has gone through, the one who has successfully bought over the shares of the other would be deemed to have just “purchased a property”, and therefore Seller Stamp Duty (SSD) would be applicable on this portion of the property that has just been purchased.


So, for example:


Your current property is worth $2 million and both you and your spouse are on a 50–50 allocation. You just carried out decoupling and have bought over your spouse’s share that is worth $1 million.


Should you all change your mind in the next 1 year and decide to sell the whole property instead, Seller Stamp Duty of 12% would be payable on that $1 million.


Therefore, it is important to properly think through the purpose of retaining the current property, whether it is worth retaining still, and the probability of selling it within the next 3 years after you have carried out decoupling.


Should the current property have already stagnated in terms of performance, or if there could possibly be a chance that you might want to shift to a different location altogether in future, then selling it would actually be a more ideal option as compared to decoupling.



Speak To A Trusted Property Agent in Singapore To Decide If Decoupling Is The Right Choice To Take

In summary, the few factors that we have stated above are generic in nature and varies according to each family's unique situation, finances as well as their property goals. What works for one might not work for another.


Do reach out to us to allow us to understand your current circumstances better first before we can advise further on whether decoupling would be a suitable route to take. We will be able to run you through the workings and specific calculations first to determine whether the numbers make sense for you and your spouse.


We hope that the above article on decoupling and the 6 key factors to consider if decoupling your private property in Singapore is the right choice for you has been a helpful read for you.


 

More About Us:

Here at The Open House SG, we help home buyers & investors find their dream home and make better-informed investment decisions.


We also help property owners market and sell their properties at the most optimal price & in the shortest time possible through digital marketing, home styling and creating buyer experiences.

Contact us directly if you need any assistance with your property buying & selling needs.



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