• Priscilla Low

Things You Want To Know About The 35% ABSD (Trust)

Updated: May 11


What an eventful weekend! First of all, it was the launch of Piccadilly Grand. If you don't know about it, here's my earlier blog post. Choice units are still available for the bigger units so contact me for a show flat viewing for 3BR flexi units and up.

Piccadilly Grand Sells 77% On Launch Day

Definitely, we expected nothing less from this A-team of reputable developers and architects. Piccadilly Grand saw strong launch sales on 7 May where 77% was sold within a day. It was oversubscribed by more than 4-folds, with a 22% chance of securing a unit!


Before the dust could settle on the Piccadilly Grand launch, there was another announcement on the 9 May morning that rippled through the real estate landscape - 35% ABSD for those buying under trust.

35% ABSD For Those Buying Under Trust

1. What is a Trust?


A trust is one of the ways to distribute your assets and estate. It is a legal arrangement that:

  • allows an individual (known as the settlor) to place your assets such that

  • an appointed trusted person (known as the trustee) can administer and manage them

  • for the benefit of the people who would be inheriting the assets in your trust (known as the beneficiaries).

Buying Property Under Trust


2. Why Set Up A Trust?


Why Set Up A Trust?

There are many reasons why people would set up a trust, and here are some of the common ones:

  1. Estate planning: Trusts are often used, in conjunction with will, to transfer and divide property amongst the beneficiaries after his death.

  2. Spendthrift protection: It is also a means to help conserve the assets where it is managed by a responsible adult or a professional trustee company for the benefit of the beneficiaries.

  3. Asset protection: In some situations, a trust could make certain property bankruptcy-remote entity. In this manner, the assets are safe from claims made by the creditors of the settlor.

  4. Charities: Trusts are devices frequently utilised to ensure that assets are properly used for the benefit of a charitable organisation.

  5. Providing for children: In Singapore, some buyers set up trust to provide for a child who is a minor, or has special needs.


3. What is this ABSD (Trust)?


35% ABSD (Trust)

At the wee hours of 8 May 2022, a new regulation was announced. All residential properties bought via a trust arrangement would be subject to a 35% ABSD tax. Let's dissect the technical jargons and understand its implications.


In short, you will need to pay an upfront 35% ABSD tax if you are buying a residential property under trust. And let's zoom to the first burning question in everyone's head.


I just paid my 5% option fee for a new launch on 8 May, which I am buying in trust. Must I pay the 35% ABSD?


The answer is yes. While you have paid the option fee, you have not exercised the agreement for the purchase. All residential properties bought in trust, where its Option To Purchase (OTP) or Sales & Purchase (S&P) agreement are exercised after 9 May, would be subject to the ABSD (Trust).



4. Is There A Remission Of This ABSD (Trust)?


YES, you can apply for ABSD remission and have your ABSD refunded in part or in full if your trust arrangements fulfil the below conditions as stipulated on the IRAS webpage:

35% ABSD (Trust) Remission

Oops, did you faint at the first sentence? Hahaha! Fear not, this is what it means. In short, if you want the ABSD to be refunded, you have to meet the below criteria:

1A: the trust should have an identifiable beneficiary

1B: the beneficiary ownership should be currently vested in the beneficiary

1C: the trust should not have any conditions

2: the ABSD (Trust) of 35% has been paid

3: the remission application should be made within 6 months of the exercise date of the OTP or S&P agreement


5. Which Situations Are ABSD (Trust) Not Refundable?

35% ABSD (Trust) Not Refundable

Here's some examples to illustrate criteria 1A-1C:


Q1: I want to buy a property in trust for my unborn child. Must I pay the 35% ABSD? Can I apply for ABSD remission?


According to IRAS website, you have to pay the 35% ABSD, and you will not be eligible for ABSD remission. This is because your unborn child is not an identifiable beneficiary. He/She does not exist yet.


Q2: I want to buy a property in trust for my 30-year-old grandson and he is entitled to the property when he gets married. Must I pay the 35% ABSD? Can I apply for ABSD remission?


According to IRAS website, you have to pay the 35% ABSD, and you will not be eligible for ABSD remission. This is because there is a condition attached to the beneficiary ownership.


Q3: I want to buy a property in trust for my 7-year-old son and he will inherit the property when he is 21. Must I pay the 35% ABSD? Can I apply for ABSD remission?


According to IRAS website, you have to pay the 35% ABSD, and you will not be eligible for ABSD remission. This is because your 7-year-old son's beneficiary ownership is vested in the future when he turns 21 years old.


Q4: I want to buy a property in trust for my 7-year-old son and he will have beneficiary ownership now with no conditions attached. Must I pay the 35% ABSD? Can I apply for ABSD remission?


According to IRAS website, you have to pay the 35% ABSD.


You can apply for ABSD remission with 6 months of the date of exercise. This is because your 7-year-old son's beneficiary ownership is vested now without any conditions.


Note: Always confirm with your legal firm that the trust deed content is aligned with the eligibility conditions for the remission. If you need any recommendations of legal firms that specialise in trust and property transactions, contact me and I will link you up.


Q5: Would the ABSD remission be refunded into the trust account of the beneficiary?


The ABSD will be refunded in cash with no restriction of use.

 

Do also note that this post was done right from the announcement, and this is the current understanding gathered from the legal practitioners about its legality. The post will be updated as we await the finer details to have a clearer picture of its dos and donts.


Our advice for all clients would be to consult closely with your lawyer before making your purchase. If you need any recommendations of legal firms that specialise in trust and property transactions, contact me and I will link you up.

 

ABOUT THE AUTHOR

PrisLowxProperty - Property Decisions Made Simple

Before the change to real estate, Pris Low was in the non-profit sector for close to 20 years, helping distressed consumers, disadvantaged families, children with special needs, persons with disability and frail seniors.


Now she finds it equally meaningful to be able to work directly with individuals, couples and families to plan their property path, find a right home within their comfortable finances and help them build resilient families that can flourish and overcome challenges.


Each property path is unique to the family, and there is no right and wrong path as long as it guides the family towards achieving their goals at its own pace.


You may hear many agents saying, 'Now is the best time to buy a property'. Pris Low believes that, 'Now is the best time to start your property planning'.


Every journey starts with a single step. Contact me for a non-obligatory chat!


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