A Simple Guide to Decoupling Property in Singapore: Legal Ways to Avoid ABSD

What is decoupling?

Joint homeowners can “decouple” when one co-owner transfers his/her share to the other, relinquishing his/her ownership completely. Now, this owner will be treated as a first-timer, as if he/she has not bought or owned a property before. Meaning, he/she can buy a second property without incurring any ABSD.

How does property decoupling work?

For example, if you decide to buy a $1 million second property for investment without decoupling, you will have to pay an ABSD of at least $300,000 (assuming you’re a Singapore Citizen buying a second property). But by decoupling, you can save the amount and use it for other home-related purchases such as home renovation and/or furnishings.

Please note that the calculation only illustrates the cost of the ABSD and does not include other costs, such as outstanding home loans and the Central Provident Fund (CPF) monies to be returned. We have added a more detailed decoupling scenario at the end of this article.

Sounds good, right? Unfortunately, it is not suitable for everyone.

Can you decouple your HDB?

HDB flat owners have not been allowed to transfer their ownership to a family member since 2016. In most scenarios, decoupling will only be possible for private properties.

How does decoupling work for private properties in Singapore?

There are two ways for private homeowners can practice decoupling:

1. By way of sale (part purchase)
2. Through a transfer as a gift

#1: Transfer by way of sale (part purchase)

This process involves one party legally buying all the remaining shares of the property from his/her spouse. All the terms of the contract would need to be spelled out in the sale and purchase (S&P) agreement and are usually drafted by a lawyer or conveyancer.

To complete the transaction, the buyer would have to pay the seller for his/her rights to the property, as stated in the S&P agreement, and the BSD to the Inland Revenue Authority of Singapore. The lawyer would then use these proceeds to pay off the seller’s existing mortgages, CPF used, and SSD (if any) before transferring the ownership to the buyer.

Scenario A: Joint ownership (50-50) by John and Amanda

In this scenario, John and Amanda (both Singaporeans) are joint owners with equal shares in a condominium unit for more than four years. This is also known as a joint tenancy, meaning both John and Amanda have a 50% share of the property.

In the event that one co-owner passes away, the other co-owner will inherit the entire property under the right of survivorship. This is regardless if there is a will left by the deceased.

Now, imagine John earns a high and stable income. He can get a bigger loan to buy a landed property for his family to move into, but the ABSD would be a substantial cost.

Here’s how John and Amanda can decouple the condo:

Current condo valuation: $1 million

Existing home loan balance: $500,000 (split equally between John and Amanda since each of them owns 50% of the property)

50-50% part share selling price (Since both John and Amanda owns 50% shares each in the property): $500,000 ($1 million divided by 2)

After decoupling, John will receive $100,000 in cash proceeds, which he may use for his new home purchase that’s ABSD-free.

However, Amanda will have an increased loan amount of $625,000. This may be a heavy financial burden for just a single income to support and is not recommended for everyone. We highly encourage you to speak to our Super Agents before decoupling. They can assist you with the correct financial planning so you can meet your property goals without overwhelming your finances.

However, not all properties are held in joint-tenancy or equal shares.

Scenario B: Tenancy-in-common (99-1) ownership

In this new scenario, John and Amanda are tenants-in-common. This means, instead of a 50-50% split ownership between John and Amanda, John holds 1% share of the property, and Amanda the remaining 99%.

But here’s the thing: This only works if, at the time of purchase, it was set up to be a 99-1 split ownership.

Now John may proceed to buy a new property without incurring any ABSD because he has effectively sold all the shares of his property to Amanda.

And under the 99-1 rule, the BSD fee payable is only 1% at $100, which is much lower than the $9,600 buyer’s stamp duty in the first scenario. Only the legal fees will stay the same.

The risk in this scenario will arise in the event of a divorce, where one party will own 99% of the house. You may battle this out in court, but it may take time and result in higher legal costs.

2. Transfer as a gift

You can transfer your share of a property as a gift without receiving any payment, but it is only possible if there are no outstanding mortgages or CPF monies tied to the home purchase.

New laws from 9 May 2022 regarding residential properties that are transferred into a living trust:

An Additional Buyer’s Stamp Duty (ABSD) of 35% will now apply on any transfer of residential property into a living trust. ABSD will be payable even if there is no identifiable beneficial owner at the time the residential property is transferred into a trust.

So this new change closes a loophole. This ABSD (Trust) is to be paid upfront when the transfer is made.

Can you afford to decouple? Get the professional advice of a property agent

Before decoupling your property with your spouse, speak to a certified property agent and check all the costs and risks involved. Some couples may think it’s better (and quicker) to pay the ABSD and move on, but others may be more hesitant. It is a huge financial responsibility, after all. Wherever you fall in this spectrum, it is always prudent to get advice from a professional.

Drop us a message on WhatsApp to speak to any of our Super Agents or chat with us via our Live Chat at the bottom, right-hand corner of the screen.

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