Can I use my CPF to pay for the Stamp duties and ABSD?
In short both you can. Just that in resale you need to pay cash first before apply for the refunds. whereas BUC properties you can pay straight from the CPF however you need to inform the lawyers beforehand.
If you’re considering purchasing property in Singapore, whether it’s a new development or a resale unit, one of the most common questions that comes to mind is how to manage the significant financial commitment. Beyond the property price itself, stamp duties like Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) are a key component of your total costs. Fortunately, you can indeed use your Central Provident Fund (CPF) savings to cover these property-related taxes.
Using Your CPF Ordinary Account (OA) for Stamp Duties
CPF is a mandatory savings scheme for all Singaporean citizens and Permanent Residents (PRs), designed to address healthcare, homeownership, and retirement needs. Your CPF contributions are split into three accounts: Ordinary Account (OA), Special Account (SA), and MediSave Account (MA). Each account serves a specific purpose, and for property-related expenses, your Ordinary Account (OA) savings are the ones you can tap into.
The OA is specifically designated for uses like buying a property or servicing a housing loan, as well as for stamp and legal fees. In contrast, your Special Account (SA) is for retirement needs and your MediSave Account (MA) is for medical expenses, meaning you cannot use funds from these accounts to finance your property purchase. Your OA also offers an attractive interest rate of 2.5%, which is notably higher than what many private banks offer for savings accounts.
The Payment Process: Cash First or Direct?
The method for using CPF for stamp duties depends on the type of property you are purchasing:
- For resale properties (either private or HDB): You will typically need to pay the stamp duties in cash upfront first. After the cash payment, you can then apply for reimbursement from your CPF Ordinary Account. This process involves the CPF Board issuing a cashier’s order to reimburse you. For private resale properties specifically, this initial cash payment is necessary because the title deed is still under the current owner’s name, preventing CPF from lodging a caveat on it. You can then claim back the monies after the title deed transfer is complete.
- For properties under construction (Build-To-Order HDB flats or new launch condominiums): The process is more direct. You can pay for the stamp duties directly using your CPF OA, without needing to make a cash payment first for subsequent reimbursement.
It’s important to note that the process of seeking approval and the release of funds from CPF can take around three weeks. Therefore, it’s crucial to ensure you have sufficient funds available, whether in your CPF OA or in cash, especially since stamp duties must be paid within strict deadlines.
Important Considerations and Timelines
Stamp duty payments typically need to be made within 14 days of signing the Sale & Purchase Agreement or exercising the Option to Purchase if signed in Singapore. If the document was signed overseas, the deadline extends to 30 days after receiving it in Singapore.
Penalties for late payment are significant. For delays up to three months, a penalty of $10 or an amount equivalent to the BSD (whichever is higher) is imposed. If the delay exceeds three months, the penalty increases to $25 or four times the BSD payable (whichever is higher). The Inland Revenue Authority of Singapore (IRAS) may even take legal action to recover outstanding amounts.
While CPF savings are valuable for homeownership, they are also intended for your retirement needs. There is a CPF withdrawal limit for housing, which is 120% of the property’s Valuation Limit (the lower of the purchase price or value at the time of purchase). Once this limit is reached, any remaining housing loan must be serviced by cash. However, this typically doesn’t affect buyers of public housing (BTO flats), as they are usually sold below the Valuation Limit and Withdrawal Limit to ensure affordability.
