The Additional Buyers Stamp Duty (ABSD) is a big obstacle facing property investors. Even if you can afford to pay it, the hefty stamp duty gobbles up a huge chunk of your eventual returns.
But is there a “loophole“ or a way around it?
Here are some legal ways to save on ABSD and get started on owning your second or subsequent property:
1. Buy under 1 owner so spouse can buy another under their own name
This is the most straightforward way to have two properties in the family. When purchasing your first home, such as a flat or condominium, just make sure that you or your spouse is not listed as the co-owner. In the case of a HDB flat, just list them as an occupier.
2. Decoupling a current property to free up one name for a 2nd property
This is when one co-owner transfers their share of ownership of the property to the other co-owner(s). When the exiting party buys a property, they will then be counted as a first- time home buyer.
3. Buying under an adult child's name
This is when your child (More than 21 years of age) purchases a private property under their name; but you provide the cash to make the down payment.
As a first-time home buyer, a Singaporean would not have to pay the ABSD.
While it sounds easy, this method can result in complications down the road such as affecting children's BTO/EC eligibility, loan qualification and legal ownership rights.
4. Buying Under A Property Trust with your child as a beneficiary
This is a method for the cash rich as it requires sufficient cash to purchase the property without a loan or CPF usage.
With this method, you can set up a property trust for your child below 21 years old, and buy a property under it with you as the Trustee.
Legally speaking, the property you buy in this way is not “yours”, it belongs to the beneficiary (your child).
5. Commercial/Industrial/International Properties
Commercial, industrial and international real estate is a whole different ball game from residential properties in Singapore and requires alot more research and understanding.
Segments such as shophouses, retail fronts, F&B outlets, offices and industrial B1/B2 sites all carry different risks and returns which aren't suitable for everyone. They may be subjected to GST (If the seller is GST registered) but there’s no ABSD payable on them.
International properties are usually lower in prices but requires more thorough research and understanding of local laws, finance and taxation and a good local representative to manage the property in your absence.
Which method works best for you?
There isn’t a single best method, as a lot of it depends on your financial situation, family profile, risk tolerance and plans.
In fact, there are advanced structuring strategies that consist of layering methods in different orders to help investors own more properties, obtain higher financing and save on tax and expenses.
However, as they are more complex in nature, they are unsuitable to be written in a short e-book format.
For an in-depth discussion, reach out me for a Property Wealth Planning consultation.
