ABSD Extension

ABSD Extension 2020: What You Need to Know

“ABSD Extension” has been the hot topic of concern for buyers, sellers, and developers alike these past few months. Due to the tougher economic conditions brought about by the unexpected and drawn-out pandemic, many have been calling for an extension on the substantial ABSD tax.  In response, the Singapore Government has announced a slew of temporary measures – with the ABSD Extension being at the core of them.

Trying to figure out how you might be impacted or if there are any benefits for you? Read on as we break down the main takeaways for the key parties impacted by these new measures.

Recap: What is ABSD?

Wondering what ABSD stands for? Here is a quick reminder. The Additional Buyers’ Stamp Duty (ABSD) is in its simplest form, a property tax.

When you purchase your first property, you pay a percentage of the property purchase price or market valuation (whichever is higher), known as the Buyer’s Stamp Duty (BSD).

When you purchase another property or if you fulfil other conditions, you will be liable to pay an additional tax – ABSD on top of the BSD.

Sounds like a lot of money for buying property. It is. Especially when the Government introduced further cooling measures in 2018 & 2019 to increase the ABSD rates.

ABSD Extension: In Simple Terms

This is what the hoo-ha is all about.

ABSD Refund – For individuals, to be entitled for the refund of the ABSD tax, they need to sell the first property within 6 months (from date of purchase of the second completed property or  from date of issue of TOP/CSC if new development).

Now with the extension, they have additional 6 months extension to be applicable for the ABSD refund. Conditions include:

  • 2nd property must be purchased on or before 1 Jun 2020
  • The original ABSD timeline (prior to this new extension) expires on or after 1 Feb 2020

ABSD Remission – For property developers, to qualify for remission (no payment) of ABSD on land purchase price, they need to build and sell all residential units within 5 years. Failing that, they pay a hefty 25% ABSD.

Now with the extension, property developers gain an extension of 6 months to complete their projects and or sell all units. This is pretty insignificant considering how developers were clamouring for up to 3 – 5 year extensions. But it’s still better than nothing?

Private Developers_ABSD 5 Years

Developers are granted 6 months extension for ABSD remission.

Also Read: The URA Master Plan: Understand How to Use It For Property Investment

Impact on Buyers and Sellers

Buying a new property

If you are just looking to purchase your first residential property, the good news is this does not affect you at all. You can stop reading now. Here are some other articles that might be of use to you.

If you are looking to purchase a second private property, here is some good news. For new developments, even with the extended 6 months, property developers with larger land parcel projects will continue to face the pressure of selling surplus units amidst a difficult environment. Prior to this extension, developers were calling for an extension from 5 to 7 or 10 years. This 6-month extension is but a small relief compared to what they wanted. This poses an opportunity for buyers, like yourself, who could benefit from potential discounted offers in the short-term where developers are motivated to complete and sell their units within the ABSD timeframe.

Even if you were looking to purchase off the open market, many sellers are facing incredible pressures selling in a tough market like this. This 6-month extension is but temporary. Sellers who have been struggling to get their property off the market will re-evaluate their options to get a quick sale during this grace period. This works in the favour of anyone looking to purchase during this time.

On top of these good news, with the 2020 SIBOR-pegged mortgage rates being under priced at the moment,  the ABSD extension is still looking pretty beneficial for buyers overall.

Selling property

There, there. These are definitely bad times to sell. But there are things you can do to mitigate any potential losses and maximise your gains. 6-months more to sell definitely takes some of the pressure off you. So, take this ABSD extension as an opportunity to review how you can improve your chances of selling!

Firstly, check if you are applicable for the extension:

  • 2nd property must be purchased on or before 1 Jun 2020
  • The original ABSD timeline (prior to this new extension) expires on or after 1 Feb 2020

If you qualify for the above conditions, you can apply for the refund when you complete the sale by sending an email to estamp@iras.gov.sg with the subject “Temporary Relief Measures for ABSD Spouses Remission – Insert Property Address”, containing the following declaration/documents. If in any doubt, please make sure you clarify with the IRAS authorities before proceeding.

With a new timeline, here are some ways you can consider improving your chances to maximise your gains during this sale:

  • Re-negotiate with prospective buyers: You have buyers in the line-up? Then you are in a great position. Open your communication channels with these buyers and learn about their concerns. These uncertain times can make buyers re-think their big spending decisions. Where possible, try to address their concerns to close the sale. Even if it requires you to re-evaluate your asking price.
  • Re-evaluate your asking price: This might be inevitable. Especially since there is a looming ABSD deadline. Instead of losing the full ABSD amount, would you not consider reducing the asking price to facilitate a sale and minimize your losses?
  • Motivate your property agent: Consider providing your agent a stronger incentive with higher commissions on the condition they close the deal prior to the deadline. With higher commissions they can dedicate more resources towards focusing on closing this deal. Do your calculations – you will realize that the higher service fee will be worth it in contrast with the significant ABSD loss.

Also Read: Property Cooling Measures in 2018: Have the Effects Wear Off?

Has ABSD Extension impacted your decision to buy or sell?

Hope our simple breakdown of the impacts of the ABSD extension on various parties have helped you re-consider your decisions to buy or sell more effectively.

If you need any professional help in navigating the various steps of buying or selling during this period, feel free to contact us for a discussion on your needs.

Scroll to Top