All values are denominated in SGD, and each individuals tax return is filed separately.

YA 2020

Details:

Husband

John Clarkson (Singapore PR) 47 years old

2019 OW = $144,000

2019 AW = $44,000

Occupation: Bank IT Project Manager

Wife

Ariel Goh (Singaporean) 37 years old

2019 OW = $90,000

2019 AW = $32,000

Occupation: Bank Relationship Manager

John has a track record of working in investment banks, both in London and in Singapore. 10 years ago, he met Ariel at his workplace and fell in love. Thus, he decided to get married and to settle down in sunny Singapore instead of returning to London. They have 2 lovely daughters, Annabelle and Eunice, aged 7 and 4, respectively.

Currently, they are staying in a 5-room semi-detached property in central Singapore. It was purchased 6 years ago under joint tenancy for $2.3 million and the market value of the property is now worth approximately $3 million. There is an outstanding mortgage of $1.3 million on the property and they have mortgage insurance in place for this outstanding liability.

As both work in the finance industry, they are familiar with investments and have built up a significant investment portfolio. John naturally transfers all the dividends and interest earned into his Singapore multi-currency bank accounts. Their investment portfolio includes the following:

UK stocks (Johns): S$200,000. Dividends paid S$6,000

UK fixed deposits (Johns): S$100,000. Interest earned S$1,400

SG stocks: S$100,000 (Ariels). Dividends paid S$4,000

US stocks: S$60,000 (Ariels). Dividends paid S$1,000

Now that property prices have risen in their favour, John and Ariel have been toying with the idea of selling their landed property and purchasing 2 equal-sized condominium units instead, one for own stay and another for renting out. John is aware that he will probably need to retire in the next 10 years and prefers to enjoy the fruits of his labour rather than sitting on home equity. They hope to make these changes without making significant changes and without affecting their investment portfolio, as it provides them with an alternate income stream.

John father, aged 70, is retired and lives alone in London. His mother had been diagnosed with late stage stomach cancer and passed away 5 years ago. His father now makes annual trips to Singapore to visit John and his family. John provides his father with a monthly allowance of S$1,000. Ariels parents, both aged 65, are also retired and live in on their own in a 4-room HDB flat in Toa Payoh. Ariel is the only child in her family. Her parents have green thumbs and enjoy planting vegetable and fruit trees in her garden. Although her parents do not live with her, they drop by Ariels home daily in the afternoons to care for their granddaughters and leave only after dinner. Ariel provides her parents with a monthly allowance of $750. Ariel has hired a domestic helper to help her with household chores and pays for all charges associated with hiring a domestic helper.

As John is in the IT industry, he needs to constantly upgrade his computer skills. Last year in 2019, he attended an IT course which was spread over 8 weeks and costs $10,000. His employer offered him a course fee subsidy of 40% and he paid for the remaining course fees out of his own pocket.

Both John and Ariel have yet to accumulate the Full Retirement Sum in their CPF accounts as almost all their CPF OA savings have been used to pay for their current home. They have made CPF nominations and have nominated each other as the sole beneficiary. However, they have yet to draw up a will and have not done any estate planning.

Question 1 (45 marks)

The couple have a Parenthood Tax Rebate credit balance of $1,430 since their last tax filing. They have also agreed to apportion all tax reliefs and tax rebates equally between them. Compute the income tax payable for both John and Ariel for YA2020.

Question 2 (30 marks)

Analyse the couples current tax situation and propose tax planning strategies they can implement to minimise their total taxes payable in order to demonstrate your knowledge of the subject matter.

Question 3 (25 marks)

Illustrate how the couple should go about generating their desired rental income stream whilst minimising duties payable and transaction costs. Show the duties that would be payable in this manoeuvre.