SINGAPORE, 9 May 2022 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on ABSD for Residential Properties transferred into a Living Trust.
The MOF has imposed the application of ABSD (Trust) of 35% on the transfer of residential property into a living trust with effect from 9 May 2022.
This serves to level the playing field among market players, as prior to this, some have opted to purchase and hold a property in trust for their minor children, where ABSD would not be applicable. The new ABSD (Trust) mechanism allows for the application of a remission if certain conditions are met. However, the scenario of holding a property in trust for minor children till they turn 21 years of age (i.e legal capacity) will not qualify for remission. For most of the other scenarios, the refund ensures that the ABSD would be effectively paid at the prevailing rates of the beneficiary.
There has been some ground sentiment over the fact that those with minor children and the ability to pay in cash for properties held in trust are exempt from paying ABSD. While it is the intention of parents to leave an advance legacy for their children, some have bemoaned that this runs the risk of exacerbating the state of inequality. There is no policy that can please all stakeholders, but going by how the government has been tweaking the rules to create a more inclusive and fair society, including the latest Budget 2022 revisions to property tax and vehicle tax, the writing was on the wall on the creation of such trusts. However, it should be noted that the authorities are not frowning on legacy planning, hence unconditional and irrevocable trusts can still avail themselves to the applicable ABSD (Trust) refund.
The overall market impact is not likely to be significant, as the majority of property purchases are not made via trusts. However, the punitive ABSD (Trust) rate of 35% is likely to cause quite a few families to reconsider providing a conditional legacy for their children via the trust route. At the end of the day, with the rising costs of properties, some families may still decide to bite the bullet and secure a property as an early head-start for their young children i.e vest the beneficial interest immediately.
ENDS
For further information, please contact:
Seah Li Ching (Ms)
Corporate Communications
DID: +65 6393 2369
Email: liching.seah@etcsea.com