Is ABSD stopping you from purchasing your next property? Fret not, here are 3 ways you can save on ABSD.
We have previously covered all the necessary details you need to know about ABSD.
Now, we will find out how to go around it.
1. Purchase your first property under one person’s name
Rather than buying a property under both spouses’ names, you and your spouse will be able to each own your first property without the need to pay ABSD by buying private properties under one person’s name. This requires you to have a fair bit of money from the start as well as a relatively higher income in order to obtain a higher loan amount.
Alternatively, you can purchase your first HDB flat under the Single’s Scheme when you turn 35, allowing your spouse to purchase his/her first property under his/her name subsequently.
This is something that most people might not be able to take advantage of already, whether is it because you already have a property under you and your spouse’s name, or because of a lack of funds. Let’s check out an alternative.
Already own a property with your spouse? Decoupling involves one spouse giving up his/her co-owner status and becoming an “authorised occupier” instead. Simply put, if you and your spouse both co-own a flat, you can transfer your share of the property to your spouse. As a result, your spouse is now the sole owner and you are free to buy another property under your name, without having to pay ABSD.
However, decoupling comes with some drawbacks too that have to be taken into consideration.
Firstly, the transfer of shares will incur a buyer stamp duty rate.
Secondly, ABSD is still payable on the value of the share transferred if your spouse already has more than one property under his/her name.
Thirdly, the spouse that takes over the full ownership of the property is subjected to Seller’s Stamp Duty for that share if the property is sold within three years of the transfer.
Fourthly, legal fees have to be forked out to conduct the transfer of shares.
Last but not least, HDB flat owners are not allowed to transfer their ownership to a family member, unless under the grounds of marriage, divorce, death and the likes. Essentially, decoupling is only for private properties.
With seemingly so many drawbacks, you might be wondering whether decoupling is still the right move to save money. Will you end up spending more money? Well, careful calculation and analysis of your current situation and future plans are needed to decide whether to actually decouple.
3. Buying through a trust
If you have children that have yet to reach the age of 21, this might be the solution for you. Due to the lack of legal capacity to own a property under his/her name, you can opt to set up a trust to purchase a property with your child as the beneficial owner. However, do note that the burden of paying taxes and duties rests upon the shoulders of the trustee. Unlikely to get a bank loan, such purchases must also be done with cash alone. Needless to say, you will need a lot of spare cash lying around to buy a property through a trust.
Interested to find out more? Contact us and we will be more than willing to help you.