In the latest Budget 2013 announced by the Finance Minister, the property tax rate for investment property will increase progressively for those properties with Annual Value (AV) above $30,000, instead of flat rate of 10% currently. The new tax rates range from 10% to 19% in 2014 and 10% to 20% in 2015. Please see table below.
Investment Residential Property Tax Rate
Annual Value | Tax Rates from 1 Jan 2014 |
Tax Rates from 1 Jan 2015 |
First $30,000 | 10% | 10% |
Next $15,000 | 11% | 12% |
Next $15,000 | 13% | 14% |
Next $15,000 | 15% | 16% |
Next $15,000 | 17% | 18% |
In excess of $90,000 | 19% | 20% |
So it seems that if you want to invest in residential property to earn the rental income, it is better to get a small unit with AV less than $30,000. Then your tax rate will still stay at 10% bracket.
There is one more risk now. Even if the property is left vacant, you are still liable for the property tax from 1 Jan 2014, instead of seeking property tax refund for vacant property.
And for owner-occupied residential properties, the tax rate will increase substantially for the top 1% of the households. The current maximum tax rate is only 6% but will become 16% in 2015. Please see table below.
Owner-Occupied Residential Property Tax Rate
Annual Value | Tax Rates from 1 Jan 2014 |
Tax Rates from 1 Jan 2015 |
First $80,000 | 0% | 0% |
First $47,000 | 4% | 4% |
Next $5,000 | 5% | 6% |
Next $10,000 | 6% | 6% |
Next $15,000 | 7% | 8% |
Next $15,000 | 9% | 10% |
Next $15,000 | 11% | 12% |
Next $15,000 | 13% | 14% |
In excess of $130,000 | 15% | 16% |
With all the many rounds of cooling measures on properties and the new tax rate, it is probably good to diversify your investment to overseas properties or REITS that are listed in Singapore Exchange. REITs are not subject to the hassle of engaging agent to find tenant, maintaining the properties and also paying higher property tax.