99-1 Isn’t Illegal: But Here’s When Decoupling Becomes Tax Avoidance
This follow-up builds on our earlier explainer on the illegal two-stage 99-1 (“100 then sell 1”) cases — read that first if you haven’t: Explaining 99-1 & what’s illegal in the PropNex drama.
“99-1” ownership and decoupling aren’t automatically illegal. But the why and how matter. A recent High Court judgment (June 30, 2025) sharpen the line: if your goal is solely to avoid ABSD — especially with side agreements that hide the true ownership — you could face back taxes, penalties, and even lose any claim to the home later.
This news shocked many property owners, as it is very common to have a 99-1 arrangement for decoupling later.
What 99-1 & decoupling legally are
99-1 is just an unequal tenancy-in-common split. Decoupling is when one co-owner fully transfers their share to the other, often so the transferor no longer owns any home and can buy the next one as a first-timer (no ABSD).
In principle, both are lawful if they reflect true beneficial ownership and proper stamp duty is paid.
What the High Court just signalled
The court emphasised intent and substance. If a planned or executed decoupling is a contrived scheme to dodge ABSD — e.g., a nominal transfer where the “seller” secretly remains a beneficial owner — that’s tax avoidance/evasion territory.
Even if the second purchase never happened, an illegal purpose can still taint the arrangement.
When 99-1 crosses into trouble
- Sham/side deals: 1% owner “transfers out” but still shares the first home’s benefits → misrep to IRAS on true ownership.
- Under-stamping risk: using 1% purely to pay less duty ahead of a planned decoupling can attract strict-liability under-stamping penalties.
- Clawbacks & surcharges: IRAS can claw back ABSD and impose penalties where avoidance is found (separate from the earlier “two-stage 99-1” cases that already saw full ABSD + surcharge).
What’s still okay (with real substance)
Outright, genuine transfers where the transferor truly gives up beneficial ownership and ad valorem duty on market value is paid — remain legitimate. A spouse who truly no longer owns any home can buy the next one without ABSD. But they’ve really given up rights to the first home.
Gifts (with no consideration) is where you gift all/part of your share to a spouse or family member only if it reflects a real change in beneficial ownership. After a gift, the donor should treat themselves as having no remaining interest/rights in the property. Paper it properly: a Deed of Gift, bank/lender consent (if there’s a mortgage), title update with SLA, and contemporaneous records of who pays the loan, taxes, and expenses to evidence the new ownership.
In other words, if you own the 1% yet you contribute to the downpayment or monthly installments beyond your shares, you have to treat it as a voluntary “gift” without conditions. Your interest/rights to the property still remain as 1%.
Conclusion
99-1 and decoupling are tools, not loopholes. Use them with real commercial substance, or you risk back taxes, penalties, and losing your claim to the home.
For husband & wife that currently owns a house in 99-1 structure, you can still go ahead to decouple. That is still legal, but when you decouple, assume the transferor has no more stake — and cannot later claim “actually I still own part of it.” Courts don’t uphold sham setups. Make sure transferor no longer have any beneficial rights to the house, such as rental income.
When you have demonstrated that you decoupled cleanly and no longer holding any beneficial ownership to the house, then you can go ahead and purchase a new house as your sole property without incurring ABSD.
