Friday, January 23, 2009

40% tax rebate for owner-occupied residential properties

THE government will provide a 40 per cent property tax rebate for owner-occupied residential properties for 2009 in a bid to ease the financial burden on households this year.

The rebates will cost the government some $75 million in all, said Finance Minister Tharman Shanmugaratnam yesterday.

He also said that right now, owners who own higher-value homes (homes with a net annual value of more than $150,000) or secondary residences have to pay income tax on the net annual value of their property. This tax will be removed from year of assessment 2010 onwards.

The net annual value of a property is an estimate of how much the property will fetch on the rental market, less related expenses.

Analysts said that the 40 per cent property tax rebate is a broad measure that will help most households here, as most homes in Singapore are owner-occupied. Right now, the property tax for owner-occupied homes stands at 4 per cent of the property’s net annual value.

On the other hand, income tax exemption for higher-value homes or secondary residences will affect few. Most properties have a net annual value of less than $150,000, said Ooi Boon Jin, executive director of KPMG Tax Services.

Analysts said that the two measures should be taken together with all the other handouts announced yesterday.

‘If you look at the whole thing holistically, families will save a few hundred here, a few hundred there, which all adds up,’ said Choo Eng Chuan, tax services partner at Ernst & Young. ‘A 40 per cent property tax rebate for owner-occupied homes is a broad-based measure.’

Some analysts pointed out that owners who rent out their properties will not benefit from the property tax rebate. The property tax on rental properties is 10 per cent of the net annual value.
The government yesterday offered a 40 per cent property tax rebate to landlords of industrial and commercial properties. If this had been extended to residential properties as well, it would have helped ease the financial burden of Singapore’s expatriate community - if the rebates are passed on by the landlords - said Tay Huey Ying, Colliers’ director for research and advisory. ‘This will help to improve Singapore’s cost competitiveness,’ she said.

Mr Tharman also said that to ensure that public housing remains affordable to first-time home buyers, the government has decided to increase and broaden the Additional CPF Housing Grant (AHG) for first-time home-buyers.

It will increase the maximum grant amount to $40,000, from $30,000 previously. At the same time, the household income ceiling will also be raised from $4,000 to $5,000.

‘Another 2,700 first- time home-buyers will benefit from the enhanced AHG every year, bringing the number of beneficiaries of the AHG scheme to 8,000 yearly,’ said Mr Tharman.

The enhancements will more than double the estimated cost of the AHG scheme to about $150 million a year.

Source: Business Times - 23 Jan 2009

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