New Property Tax Computation for Home Owners from January 2011

With the latest Budget released for 2010 by Financial Minister Tharman Shanmugaratnam, property tax computation for home owners will be on a 3-tier progressive scheme.

Based on Annual Value (AV) of your owner occupied home, the tiers are as follows:-

0% on your first $6,000 of AV
4% on the next $59,000 of AV
6% on anything above $65,000 of AV

There is already a new online calculator available based on the new tax tier on IRAS website for you to computate your 2011 property tax should you be able to know the latest AV of your home.

Rationale for New Property Tax Tier

Mr Tharman explains that with a moderately progressive property tax system, together with an income tax system that collects more taxes from better-off individuals and a flat GST rate that everyone pays, will form a fair system of taxes as a whole.

And with such, this tax system will benefit most Singaporeans.

HDB Annual Value Raised

IRAS will raise the annual value of HDB flats with effect from 1st January 2010.

AV increase for HDB flats

IRAS reviews the AVs of all properties, including HDB flats, annually to ensure that they reflect prevailing market rental values for the purpose of determining property tax.

The last AV revision for HDB flats was however done two years ago on 1 January 2008, based on rental values in 2007. AVs for HDB flats were not revised on 1 January 2009, notwithstanding that HDB rentals had increased significantly (by between 31% and 37%) in 2008 relative to 2007. The adjustment in AVs was deferred in view of the uncertainty in market rental trends in the midst of the economic recession. There was evidence of declines in rental values from late 2008, with the risk of further significant declines in 2009 given the negative economic outlook at the time.

HDB rentals have stabilised after a moderate decline from late 2008 to the middle of 2009, and have since begun to rise. As a result, current values of HDB rentals, as well as HDB resale prices, are still significantly higher than levels observed in 2007. The AVs of HDB flats will therefore have to be adjusted, beyond the last revision in January 2008. IRAS will therefore revise the AVs of all HDB flat types with effect from 1 January 2010.

You can read more from IRAS’s official release here.

IRAS – No Changes to Tax for Property Gains

Nothing new is springing up from Inland Revenue Authority of Singapore (IRAS), after a period of uncertainty especially to property investors with the recent speculations of government measures to firm up the possible taxation of property owners selling their assets for capital yield.

Previously it was proposed that an individual who sells a property would not be taxed on the profit if he had not sold any other property in the preceding four years.

The public consultation process for the proposal attracted 64 responses with 60 opposing the change. This rule would be confusing to sellers amidst the economy which seems to start finally picking up pieces.

The gray area of how IRAS actually goes after property owners who transacts property on a regularly basis will still persist, but its still better than punishing long term investors who deem investing in property as a financial tool to hedge inflation over a long period.