Nowadays Shunt Active Power Filter (SAPF) system still suffers from stability issue which heavily detect its performance. In this paper, an improved system level model is proposed to investigate the coupling effect that will cause the system level instability. This model describes the coupling effect with an additional output admittance and shows system stability more directly. In order to investigate the correctness of the proposed method, a grid including the SAPF and a non-linear load is modelled with both conventional approach and proposed modeling method. Simulations are carried out with the same parameters. Results show that the instability of the grid current observed in the simulation results is not reflected in the stability analysis based on the conventional model. On the other hand, the stability analysis with the new model matches the simulation results very well. Also, further verification is made by a frequency-sweep result, which proves the accuracy of proposed model.