With the ever-increasing market rentals, understanding the Annual Value (AV) of your property in Singapore has become more important than ever. The Inland Revenue Authority of Singapore (IRAS) recently revised the AV of HDB flats and private residential properties in 2022, affecting homeowners with properties valued above $30,000 annually.
In this article, we will delve into everything you need to know about the Annual Value of a property in Singapore. From its definition and calculation to its implications on property taxes and government schemes, we've got you covered.
What is the Annual Value of a property?
The Annual Value, or AV, is the estimated gross rental income that a homeowner could earn annually if they decide to rent out their property. It is calculated by deducting an allowance for furniture, furnishings, and maintenance costs from the rental value.
In simple terms, the AV represents the annual passive income you could earn from renting out your property for a year. The IRAS determines the AV based on the average estimated gross annual rent of similar properties in the vicinity.
For example, if you own a 4-room flat in a condo, but other 4-room flat owners within the same area are renting out their units at varying prices, the IRAS will estimate the AV of your flat by considering the average annual rents of all 4-room flats nearby.
Why should I know the Annual Value of my property?
Knowing the AV of your property is crucial for several reasons. Firstly, it directly impacts the property tax you are required to pay annually. Generally, a higher AV translates to a higher property tax. If you plan to be or already are a landlord, understanding property taxes is crucial for your investment plan.
Additionally, the government uses the AV of your property to assess the financial wealth of a household. Therefore, the AV also plays a significant role in determining your eligibility for various government benefits, such as the GST Voucher Scheme and Self-Employed Person Income Relief Scheme (SIRS).
Implications of Annual Value on Government Schemes
The Annual Value is a key criterion for determining eligibility for government benefits like the GST Voucher Scheme and SIRS. These schemes aim to provide support to those in need based on their financial circumstances.
Under the GST Voucher Scheme, if the AV of your property is $13,000 or less, you will be entitled to larger payouts in the Cash and MediSave components of the voucher. On the other hand, those with annual values of $21,000 and above are automatically ineligible for receiving GST vouchers.
Similarly, the SIRS allows self-employed individuals to receive cash payouts. The AV threshold for SIRS is set at $21,000, covering the majority of Singaporeans with taxable income.
How do I calculate the Annual Value of my property?
Calculating the AV of your property involves considering various factors, such as rental value, property size, condition, location, and other physical attributes. However, the IRAS does not disclose its methodology for deducting costs related to furniture, furnishings, and maintenance fees.
To obtain the accurate AV of your property, it is best to check it on the IRAS website. They provide an online service called the IRAS MyTax Portal, where you can view your property's portfolio and assess its AV.
Can I appeal against the AV of my property?
If you disagree with the proposed assessment of your property's AV by IRAS, you have the right to file an objection. You can do so within 30 days from the date of the Valuation Notice or through the IRAS property Valuation List before 31 December of the year if you can demonstrate that market values have dropped below the AV.
If you are unsatisfied with the outcome of the objection, you may further appeal to the Valuation Review Board within 30 days of receiving the notice. However, be aware that a fee is required for this appeal process.
How does Annual Value affect property tax in Singapore?
The property tax payable is determined by multiplying the AV of a property with the relevant property tax rates. A higher AV results in a higher property tax.
For owner-occupied properties, the tax rates are generally lower compared to non-owner occupied properties. However, property tax rates for owner-occupied residential properties will be adjusted in 2023 and 2024, affecting properties with an annual value of more than $30,000 and all non-owner occupied properties.
Here's an example: If the AV of your property is $25,000 and your tax rate is 10%, your property tax payable would be $2,500.
It's important to note that some residential non-owner-occupied properties fall within a property tax exclusion list and are taxed at a fixed rate of 10%.
Conclusion
Understanding the Annual Value of your property is crucial for homeowners in Singapore. It not only determines the property tax you need to pay but also affects your eligibility for government benefits. By staying informed about the AV and its implications, you can make informed decisions regarding your property investment and financial planning.
If you have questions about your property's Annual Value and how it impacts your home loan in Singapore, Dollarback Mortgage can provide the advice and clarity you need. Plan ahead for property tax when taking up a home loan to avoid any unexpected surprises.
Remember, staying knowledgeable about the Annual Value of your property will help you navigate the complex world of property taxes and government schemes.