3 myths about ABSD that have landed property buyers in trouble

Source: Straits Times
Article Date: 02 Mar 2026
Author: Tan Ooi Boon

The law allows the taxman to disregard any sham schemes that avoid taxes and impose penalties on the offenders.

Before you buy an investment property here, it is crucial that you understand Singapore’s unique tax regime for real estate so you don’t end up on the wrong side of the law, or worse, losing the whole unit.

Here are the three key misconceptions that have landed property investors in trouble because of their eagerness in avoiding paying the additional buyer’s stamp duty (ABSD).

Using the kids to hold your properties

In the past, many parents thought it was a good idea to use their children to hold their investment properties under a trust deed because no ABSD was payable then.

But from May 2022, the taxman started imposing ABSD (Trust) for such purchases and the prevailing rate is 65 per cent.

Parents may apply for a remission of this levy if the trust meets all the required conditions, such as if there is a genuine beneficiary who will eventually take over the asset when the person turns 21 years old.

Even if you are cash-rich, you should make use of such schemes only if you are genuinely giving the properties to your children.

There have been at least two cases involving parents who bought properties under a trust for their children when they were actually using the arrangement to avoid paying ABSD.

When they later sued for the properties because they needed to cash out their investments, they lost their claims because the courts ruled that the properties belonged to the children.

Once a trust arrangement has been created for a minor, such properties cannot be sold without the court’s approval.

Recently, a woman applied to court to sell a property that was held in her young son’s name for a $500,000 profit, but her application was dismissed because she could not show that the sale was for the child’s benefit.

In another case, a father succeeded in getting the court’s approval to sell two properties that were under his children’s names because he was facing financial woes and was at risk of losing his job.

But the court ordered that the sales proceeds must be deposited in a special account and the funds there can be used only for the benefit of the children.

Parents who misuse such funds for themselves can be taken to task because it shows the original trust transaction was just a sham to avoid the ABSD liability.

Those caught using fake schemes will have to pay the correct ABSD, and are liable to a further 50 per cent surcharge, or a penalty of up to four times the payable duty, depending on the facts of the case.

‘It is fine to use loopholes’

Those who make such remarks are ignorant of tax laws, which allow the Inland Revenue Authority of Singapore to disregard any schemes that are designed to avoid paying tax and impose penalties on those who pull such stunts.

So all loopholes, including blatant ones like the infamous 99-to-1 arrangement, are doomed to fail from the word go. Some tax planners had challenged the taxman’s decision by appealing to the courts in the past – in vain.

Before you consider similar moves, you should know that the legal fees for pursuing such cases will be hefty, and you risk losing even more if you fail to show that your arrangement is legitimate.

It is not illegal to avoid paying tax

Yes, it is not illegal to avoid paying more tax, provided you do so by the book. For instance, if you own a residential property, you can avoid paying ABSD legally by selling your existing home first before buying a new one.

If you choose to decouple – where one spouse transfers all shares in a property to the other spouse – you must ensure that the transaction is genuine and allows both spouses to hold two properties separately.

This is because the High Court ruled recently that such “decoupling” can also be viewed as a sham transaction to avoid taxes if the owners had ulterior motives in retaining beneficial interests in both the existing and new properties.

As property investment is an expensive affair, it is vital that you get your sums right first so that you don’t end up in trouble just because you want to save on taxes.