Assume that you and your wife own a stunning condo in Singapore. Now that your net income has increased, so you are planning to buy another property and rent this condo for rental income. Sounds easy, right? But the reality is quite opposite.
You have to pay Additional Buyer’s Stamp Duty (ABSD) for owning multiple properties as a Singaporean. Surely, this is not a favorable option for you. How can you ensure that you own multiple properties without having to pay this ABSD? Is there any other way to get this done?
Decoupling property is your required solution. This article will highlight all the ins and outs of decoupling property to give you an insight into every detail associated with the process.
Decoupling — An Overview
You definitely should go for a secondary property by leveraging the benefits that decoupling offers. This process is carried out by the couple, where they both co-own the same property. The spouse transfers his/her share of the property to the other co-owner, thus giving him/her a complete ownership of the property. Doing so spares one of the co-owners from the ownership of the property. Hence, that member can now easily own another property in Singapore without the compulsion of paying ABSD.
Make no mistake, decoupling for HDB flats is different from the above-mentioned case. There have been various cases where HDB owners were violating the HDB ownership transfer rules. This situation led to the enforcement of decoupling rules only for these following groups:
- Death of an owner
- Financial complications
- Renunciation of citizenship
- Medical reasons
Ways to Decouple Property
Once you fulfil the eligibility criteria for the decoupling of property, you can use two ways to perform this process. The couple has to go through the legal severance to ensure a legal and authentic transfer of shares. Here is how decoupling property can be performed:
Transfer Shares to the Co-owner as a Gift
The first way to transfer the shares to the co-owner is by giving all the shares as a gift without getting any payment. There are no payments made or received in the method. But remember, your property should not have any outstanding mortgages while proceeding with this method. If there are any outstanding mortgages, then you have to pay for the extra funds.
Transfer Shares to the Co-owner through Selling
The second way of transferring shares is by selling the shares of the property to the co-owner. This method is quite complex and involves the assessment of a wide range of parameters. The process is carried out differently for HDB and private properties.
Decoupling would be quite easier for Tenancy-in-Common compared to Joint Tenancy. Joint tenancy involves an equal distribution of shares between the both co-owners. If there are four owners of the property, then this distribution would span up to 25% per co-owner. If one of the co-owners dies, then his/her share will be automatically transferred to the other co-owner. There is no involvement of will in this case.
Tenancy-in-Common involves an unequal distribution of stakes between the both co-owners. If you and your spouse are owning a property, then you can opt for a 60% and 40% distribution of shares or any other unequal distribution ratio. If one of the co-owners dies, then his/her share will be distributed in accordance with the written will.
Do You Need to Pay Seller’s Stamp Duty?
Seller’s Stamp Duty (SSD) must be paid if the property was bought within three years. There are different SSD amounts based on the number of years after which you sold the property.