SINGAPORE – A woman asked her “goddaughter” to buy a $3 million apartment on her behalf, and then used the now-infamous 99-to-1 scheme to skip paying the full additional buyer’s stamp duty (ABSD) on the purchase.
She did this in November 2022, barely five months before she filed for divorce from her then husband, who co-owned their matrimonial home, also worth about $3 million.
It was not disclosed why the 54-year-old sales director chose to buy a second property using a sham arrangement to avoid over $500,000 in ABSD, when she could have waited until she divested her share in the matrimonial home during the divorce.
Although the adult goddaughter bought the second property in her sole name initially, the purchase was fully funded by the woman, who borrowed from her father and a bank.
The pair later signed a “deed of acknowledgement of trust” to establish the arrangement that the goddaughter, who bought the property as the woman’s nominee, had to give 1 per cent of its value to the woman so she could apply for a bank mortgage.
As the woman took over only 1 per cent of the property, this transfer would seemingly attract ABSD on that minute share on paper.
In the goddaughter’s sworn statement, she confirmed that she had made no financial contributions towards the acquisition or maintenance of the apartment, and that, to the best of her knowledge, all payments were made by the woman. The goddaughter added that she did not have any beneficial interest in the property.
The Inland Revenue Authority of Singapore has described such transactions as sham arrangements because they serve no purpose other than allowing existing owners to avoid paying 99 per cent of the ABSD.
So those found using the sham 99-to-1 arrangement have to pay the full ABSD and an additional surcharge of 50 per cent.
During her divorce hearing, the woman’s antics did not go unnoticed by High Court Judge Teh Hwee Hwee, who asked her lawyer whether “the relevant authorities had been approached for an assessment”, and whether the ABSD for the purchase of the property had been fully paid.
The woman’s lawyer replied that “such an assessment had been done”. It was not disclosed in the court’s judgment whether she was ordered to pay the outstanding ABSD and the penalty, which could come to about $800,000 in her case.
Although the property was bought in another person’s name, the court still included the whole property in the matrimonial pool because the wife was the true owner who paid for everything.
Here are two key lessons from the case when it comes to dividing assets during a divorce.
If you have a $3 million home but have an outstanding mortgage of $1 million, your asset’s net worth is only $2 million because the debt has to be repaid first.
This is why the value of luxury cars of many divorcing couples is seldom a sizeable amount because after considering the depreciation of the car and outstanding bank loans, it is common to see a value below $50,000.
In this case, the wife’s second property was purchased with a bank mortgage and a loan of more than $1.3 million from her father. She had been paying over $11,000 monthly to the bank as part of the mortgage plan.
At the time of the divorce, the outstanding amount of the bank loan was around $1.3 million, reducing the property’s value by that amount.
As there was a dispute over the loan the wife had supposedly taken from her father, she had to produce documents to show how her father was involved in the property purchase.
To boost her creditworthiness, the father transferred $270,000 of his investment products to her so she could borrow more for the down payment of the property.
He later made a series of cash transfers totalling $1.3 million to help her with the down payment and settling part of the purchase price.
Despite this, the husband still maintained the loan was “a fabrication designed to artificially reduce the wife’s wealth and undermine his claim to the matrimonial assets”.
He claimed it was more likely that the wife had earlier given that sum to her father, who then transferred the funds back to her as the loan. He also claimed that one of her father’s bank accounts never had balances of up to $300,000, let alone $1.3 million.
To further bolster his case, he highlighted that there were no loan documents or written agreements between father and daughter.
But Justice Teh did not buy the husband’s claim because, other than making bare claims, he did not produce any evidence to show that the wife had stashed away a huge sum of money in a secret account that would enable her to channel her own funds back to her.
“The husband’s theory would require a complex scheme involving undisclosed accounts and transactions,” the judge said.
As for the claim that the wife’s father did not have much money in his bank account, the judge said this was not conclusive that the man did not have other accounts and investments.
The father obviously had the means to help his daughter because he was able to transfer $270,000 worth of investment products to her just to boost her credit rating.
Moreover, a bank statement showed that a $1.3 million cashier’s order was used for the property purchase and was paid with funds from her father’s bank account.
Justice Teh said there was no reason to doubt that the money came from the father, given that he is a retiree and the funds were likely taken from his own retirement fund.
“The absence of written documentation was understandable given the father-daughter relationship, bearing in mind, in particular, that the loans were requested under the difficult circumstances of an impending divorce,” she added.
The judge ruled that the father’s loan would be deducted from the value of the second property, which only had a residual balance of about $470,000.
Similarly, the wife bought $2.3 million worth of insurance policies that were funded by bank loans amounting to more than $1.9 million. Just like the property, the court added the value of the insurance policies to the matrimonial assets, and this amount will be used to set off the loans for paying for these products.
The total matrimonial assets were about $4.2 million, comprising the couple’s matrimonial home, the husband’s assets of about $350,000 and the wife’s total stash of about $1.25 million, which included the second property.
As the wife appeared to be the main breadwinner who contributed more cash to the family, she was given a 75 per cent ratio for financial contributions.
As for indirect contributions, she also scored higher, with 60 per cent, in taking care of the household and their only daughter.
So her final share of the matrimonial assets was about 67 per cent, or about $2.8 million, while the husband got about $1.4 million, or about one-third share of the assets.
The wife would have been better off financially if she had waited until her matrimonial home was sold before buying the second property.
The lesson here is that you should never rush into any investment without proper checks, especially in ascertaining the risks and the laws that govern such transactions.
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