You will be able to calculate BSD by applying each rate to its slice of the price.
Hakim tried to estimate the stamp duty on the Bedok flat over lunch. He remembered that the top rate for a flat at that price was a few percent, multiplied it by S$620,000, and came back to Farah with a number that made her put down her fork. It was wrong, and too high, for the same reason people overestimate their income tax: he had applied the top rate to the whole price.
Stamp duty is the tax you pay to IRAS when you buy property. There are three kinds, and this module takes them one at a time. This lesson is about the one every buyer pays.
Buyer's Stamp Duty, or BSD, is paid by the buyer on every purchase of property in Singapore, HDB or private, first home or tenth. It is charged on the purchase price or the market value of the property, whichever is higher.
That second part matters for resale flats and for purchases between family members. If you agree a price below market value, for example when buying from a relative, IRAS charges the duty on the market value instead. For most buyers paying a market price, the price is the figure that counts.
BSD is tiered. The price is cut into slices, and the higher slices carry higher rates. Each rate applies only to the part of the price that falls inside its slice. This works the same way as income tax bands: when a pay rise takes you into a higher band, only the extra income is taxed at the higher rate.
To see how it works, take a set of tiers invented for this example. They are not the IRAS rates, which have more tiers and change from time to time:
1% on the first S$200,000 2% on the next S$300,000, up to S$500,000 3% on everything above S$500,000
For the Bedok flat at S$620,000, the first S$200,000 is charged 1%, which is S$2,000. The next S$300,000 is charged 2%, which is S$6,000. That leaves S$120,000 above S$500,000, charged 3%, which is S$3,600. Add the three slices and the BSD in this example is S$11,600.
Hakim's lunch method, 3% on the whole S$620,000, gave S$18,600. That is S$7,000 too much from a single mistake. The same mistake runs the other way if you apply the lowest rate to everything, and you would budget far too little.
The slices are why BSD as a share of the price grows as prices rise. At S$450,000, the BTO price from lesson 1.5, Compare two homes over ten years, the same invented tiers give S$7,000, about 1.6% of the price. At S$620,000 it is about 1.9%. On a S$1.2 million condo it would be S$29,000, about 2.4%.
BSD is due within a short period after you sign the contract, which for a resale purchase is usually when you exercise the option to purchase. IRAS sets the deadline, and late payment brings penalties, so your lawyer will normally handle it with you on time.
You can use your CPF Ordinary Account for BSD, but the timing catches people out. The duty is often due before CPF has approved your use of it for the purchase, so many buyers pay in cash first and have the amount reimbursed from CPF once the purchase is approved and completes. Ask your lawyer how it will work for your purchase, and keep enough cash to cover the duty for those weeks. Big goals: wedding, home, car and kids, lesson 4.2, Which parts must be cash and which CPF can pay, sorts the rest of the upfront bill into cash and CPF.
The real BSD tiers are on the IRAS website, along with a stamp duty calculator. The rates have been revised several times over the years, and the top tiers in particular change with housing policy. A number from a friend's purchase, or from an article a few years old, may be out of date.
So do the sum yourself, slice by slice, with the current table, and then run the same price through the IRAS calculator. If the two match, you understand how the duty works and you have a figure you can trust. If they don't, the likely cause is a slice boundary typed wrongly or a rate in the wrong row, and finding it now saves you the same mistake in lesson 3.4, Build a stamp duty calculator.
Farah and Hakim put the real figure into the stamp duty row of their comparison sheet, where the example placeholder had been. Do the same for the home you are considering, in the activity below.
Calculate the BSD on one home you are considering using the current IRAS table and the IRAS calculator, and check the two match.
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