Thursday, February 28, 2013

Higher taxes on high-end and investment homes

THE well-off who own luxury residences and investment homes will pay higher property taxes
The Straits Times - February 26, 2013

THE well-off who own luxury residences and investment homes will pay higher property taxes.

These will be introduced in phases over two years, starting Jan 1 next year.

Most owner-occupied homes, however, will enjoy a lower tax rate, said Deputy Prime Minister Tharman Shanmugaratnam yesterday when he presented the 2013 Budget.

"This is fair. The property tax is a wealth tax and is applied (to homes) irrespective of whether lived in, vacant or rented out. Those who live in the most expensive homes should pay more property tax than others," he said.

So, owner-occupiers of landed homes in central areas with an annual value of $150,000, for instance, will stump out 69 per cent more in property tax or an additional $5,120 a year. The annual value is the estimated annual rent the property may fetch.

But mindful that some retirees may be cash poor while living in homes of significant value, Mr Tharman said the new tax structure will ensure that most retirees pay less in property tax.

The new tax structure, which he tagged a "more progressive property tax", will swell government coffers by an additional $53 million when it takes effect fully on Jan 1, 2015.

But it will allow the Government to achieve greater social equity without hurting Singapore's economic competitiveness or reducing the incentives for enterprise, the minister added.

Besides new tax rates, the tax bands will also undergo changes.

The zero property tax band will be widened to the first $8,000 of a home's annual value, from $6,000. This will allow 950,000 owner-occupied homes to enjoy some tax savings, he said.

Homes with annual values of $12,000, like a five-room Housing Board flat, will save $80, which works out to 33 per cent of their current bill.

These savings will reduce property tax revenue by $44 million.

Besides the existing zero, 4 and 6 per cent tax rates, five higher rates will be introduced: ranging from 8 per cent to 16 per cent.

This means the top 1 per cent of owner-occupied homes - or 12,000 units - will pay more taxes, contributing an extra $25 million in revenue. But the increases will be small except for those at the very top.

For investment homes, which are not owner-occupied, new marginal property tax rates of 12 per cent to 20 per cent will be levied instead of the current flat 10 per cent rate across the board.

So while homes with annual values of $30,000 and below will continue paying a 10 per cent tax, investment homes with an annual value of more than $30,000 will pay higher taxes of between 12 per cent to 20 per cent.

These properties belong to the top one-third of all non-owner- occupied homes, or the top half of private homes, said Mr Tharman.

However, most investment suburban condominiums will see a small increase in property tax of about $100 to $300 per year with increases only "significant" for high-end properties.

These changes for investment homes will net the Government $72 million more in revenue.

Property tax rates for nonresidential properties will remain unchanged at flat 10 per cent. Tax refunds on vacant properties will be removed to provide consistency and equity in tax treatment, said Mr Tharman.

Real estate investor Sameer Aswani, 37, who owns investment homes in such upmarket condominiums as The Sail and Marina Bay Residences, said that from a businessman's point of view, the higher taxes are obviously not preferred. "But from a government's point of view, in the light of inflation, they have to take care of the 80 per cent who own HDB flats.

"If you have the money to buy high-end homes then maybe it's fair that you pay more taxes."

Martin Koh | 86666 944 | R020968Z
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