Australia and Singapore have shared a lot of history together. Their closeness as two countries increases with the passing years. Both have hard working and educated people. No longer is Singapore considered a “tax haven”. However, Singapore has the advantage of a very fair and low tax system.

General tax position in Singapore

(a) Income tax rates

Residents

The resident individual income tax rates for the year of assessment 2002 are as follows:

Taxable income  Rate Gross tax payable

A rebate of $S250 is given on the taxpayer's income tax liability for the 2002 year of assessment. This rebate is given to resident individuals only.

Non-residents

Employment income (except directors' remuneration) is taxed at the 15% flat rate or the tax based on resident tax rates, whichever is the higher.

Public entertainers are subject to a flat rate of 15% on chargeable income from that source.

A flat rate of 24.5% applies to other sources of income.

(b) Capital gains tax rates

Residents

The good news is that capital gains are not generally taxed in Singapore. There are however death duties in Singapore.

Non-residents

Gains on disposals of real property or shares in a private property company by non-residents are generally not subject to tax in Singapore.

(c) Treatment of part-year residents

This is not applicable

(d) Alternatives to individual rates

Residents

In Australia there is little tax incentive to marry. In the United States and Singapore married couples are given the option of filing a joint return or separate individual returns with the Comptroller. The tax exposure varies according to the circumstances of your position.

Non-residents

Even non-resident married couples may opt to file joint returns or individual returns with the Comptroller. However, non-residents are not entitled to any relief for the support of dependants.

(e) Rates for special categories of individuals

Residents and non-residents

Singapore income tax legislation does not provide separate rates for different categories of individuals. No favourites in Singapore.

Estate Planning in Singapore

When a person dies, the assets (both movable and immovable) left by the deceased form the estate. Estate duty is payable on the value of the estate. Under the Estate Duty Act, estate duty is also payable on insurance policies, gifts made by the deceased before death.

A person appointed under the Will to administer the estate is known as the Executor (just like in Australia). If there is no Will, then you have an Administrator (just like Australia). The Executor / Administrator apply to the Court to obtain a Grant of Representation (Probate or Letters of Administration), file estate duty forms with the Commissioner of Estate Duties and pay the estate duty and interest.

After the estate duty and interest are fully settled, they can extract the Grant of Probate / Letters of Administration and distribute the assets according to the deceased's Will or the Intestate Succession Act (if the deceased did not make a Will).

These are the majority of forms that are required:

·         SIMPLIFIED ESTATE DUTY RETURN To be used for most non-taxable cases.

·         FORM ED To be used for all taxable cases and some non-taxable cases.

·         FORM OF ACCOUNT To be used where Grant of Representation is not required.

·         OBSERVATIONS FORM To be completed for all cases

·         SCHEDULE OF IMMOVABLE PROPERTY To be completed for cases where deceased had immovable property other than HDB flat/HDB shophouse.

The forms are submitted to the Commissioner of Estate Duties within six months of the deceased's death. In Australia action needs to be taken under the common law within “reasonable time”.

For more information contact the:

COMMISSIONER OF ESTATE DUTIES

Taxpayer Services Centre

55 Newton Road

Revenue House

SINGAPORE 307987

Tel: 6351 3379/80

 (a) Estate taxes (Death Duties)

Residents

The estates of both domiciled and non-domiciled persons are liable to estate duty at the time of death.

(1) Liability to tax. Estate duty is payable on the principal value of property which passes on after your death, after deductions are made for your debts and funeral expenses. You are therefore looking at the net value.

Property includes movable (eg shares) and immovable property (eg land) of any kind situated in Singapore and the proceeds of sale. If at your time of death you are domiciled in Singapore, the estate includes movable property wherever located – in Singapore, Australia or anywhere. Immovable property includes real property (real estate), leaseholds and land on trust for sale. Movable property refers to other property not included in the definition of immovable property.

(2) Rates and calculation. The first $S12,000,000 of the estate is taxed at 5%. The balance of the estate in excess of $S12,000,000 is taxed at 10%.

(3) Loop holes. The following are exempt from estate duty:

(i) the aggregate value of residential properties valued up to $S9,000,000;

(ii) the first $S600,000 of property that is chargeable to estate duty or the balance in the Central Provident Fund account, whichever is the greater;

(iii) non-Singapore located immovable property of domiciled persons; and

(iv) non-Singapore located property of non-domiciled persons.

(4) Estate duty treaties. Sorry. Singapore does not have estate duty treaties with Australia, or indeed any other country.

Non-residents

Non-residents receive similar treatment to residents in relation to estate tax.

(b) Gift taxes

Residents

Like Australia, Singapore does not impose any taxes on the gifting of an asset. However, gifts made less than five years before the date of death are included as part of the estate of a deceased person for estate duties purposes. You need to know when you are going to die, at least 5 years before it happens!

(1) Liability to tax. A settlement or the transfer of an asset without valuable and adequate consideration does not attract any taxes. However, the income accruing under the settlement is deemed the income of the settlor and is assessable if the settlement is recognised as a tax avoidance arrangement to divert income or capital to another person (i.e. the beneficiary). This is in limited form of Australia’s Part IV A of the Income Tax Assessment Act 1936.

Non-residents

Non-residents receive similar treatment to residents in relation to gift tax.

(c) Wealth and asset taxes

Residents

(1) Liability to tax. Property tax is imposed on the ownership of real estate. The current property tax rate is between 4% and 10% of the property's annual value, subject to the type of property and whether it is owner occupied. Property tax is deductible against the gross rental income, if any, in determining the income assessable to income tax.

Stamp duties are levied on a variety of transactions including the transfer of shares, the transfer of real estate, mortgage agreements, tenancy agreements and other legal documents. Stamp duties are not usually deductible from profits unless dealing in such movable or immovable properties is part of the taxpayer's business (eg stock dealer or developer).

For a person dying on or after 28 February 1996 the tax rates are:

For every dollar of the first $12 million 5%

For every dollar exceeding $12 million 10%

(2) Impact of tax treaties. Wealth and asset taxes are not covered in the Singapore tax treaties.

Non-residents

Non-residents receive similar treatment as residents in relation to wealth tax.

Your Retirement – Health and Social Security

Residents and non-residents

The Central Provident Fund (“CPF”) is a statutory saving scheme to provide for the old age retirement and medical needs of employees in Singapore. In Australia only employers are required to contribute to the employee’s super funds. This compulsory contribution is currently 9% (and rising) of the Australian employee’s salary. In Singapore, both employers and their employees are required to contribute to this fund.

(a) Contribution requirements

Residents

Central Provident Fund contributions are compulsory for all resident employees working in Singapore.

Contributions are payable on the employee's remuneration at the appropriate rates provided in the CPF Act. The contributions paid into the CPF are allocated to the following 3 accounts:

• the Ordinary Account, which may be used to purchase properties (both residential and non-residential), approved shares, loan stocks or gold, or to invest in unit trusts; (Conversely in Australia only wealthy people that can afford to run their own “Self Managed Super Fund” can have such control over the Superannuation.)
• the Medisave Account, which may be used to pay for hospitalisation expenses of the taxpayer and his or her family (Conversely in Australia, the “sole purpose” of Super is for your retirement. Only under extreme hardship can you get some of your Super before you retire. This early release is difficult to obtain and is frowned upon. The early release is only available if you have no money to pay for medical needs or you can’t pay your family home mortgage); and
• the Special Account, which is intended to be withdrawn only in cases of hardship.

(1) Employer contribution requirements. The employer CPF contribution is payable as a percentage of an employee's remuneration and is subject to a maximum sum that is calculated based on complicated rules.

(2) Employee contribution requirements. The employee CPF contribution rate is also payable as a percentage of an employee's remuneration and is similarly subject to a maximum sum governed by statute.

(3) Self-employed individuals. Self-employed individuals may make voluntary CPF contributions of an amount not exceeding the statutory limit. Such individuals either pay the contributions monthly or as a lump sum at year-end. (Similarly in Australia employees can make contributions to their own Super and their Spouses and of late even their children’s Superannuation. You can put the money or asset in “undeducted” which means that you put in “after tax” money. Or you can put in “untaxed income” and seek to suffer a tax rate of only 15% (up to 30% if you are on a big income). Otherwise the highest marginal tax rate you can suffer is 48.5%!)

(b) How is the Central Provident Fund taxed?

Residents

All CPF funds are tax exempt. Employee CPF contributions that are within the statutory limits are available as a tax relief against the statutory income of resident taxpayers. Therefore, there is a significant tax advantage for tax residents making contributions to the CPF. (In Australia Super is taxed going in at 15% (up to 30%) and all income is usually taxed at 15% - except for the sale of capital items at a profit – these are usually taxed at 10% if you held the asset for 12 months).

(c) Withdrawal from Central Provident Fund

Residents

Employer and employee CPF contributions may be withdrawn when an employee reaches the age of 55 or leaves Singapore permanently, or in the event of the employee's death. These CPF contributions and the interest credited to the account are free of Singapore tax on withdrawal. (Conversely in Australia, recently it has become difficult to take your Australian Super with you if you are a resident an you then permanently leave Australia. Australians can only take their Super at 55 if they claim to be permanently retiring. However, the laws are lax in this regard and many people “retire”, get their Super and then go back to full time work.

(d) What happens to the CPF when you die?

If you have made a nomination under the CPF Act, your nominee is entitled to the funds in your CPF account regardless of what is stated in your Will. In other words the nomination overrides your Will.

If you have not made a nomination, your funds are distributed under the law in accordance with the Intestate Succession Act. However, if you make a Will then your Will prevails over the CPF Act.

It you get married after making a nomination, then your nomination is automatically cancelled - unless you say that it was made in contemplation of marriage. Therefore, you ought to make a fresh nomination after the marriage. In Australia your Will is similarly revoked if you marry – unless made in contemplation of marriage. However, an Australian “nomination” for Super is not usually binding on the trustee of the Super fund. The trustee is at liberty to disagree with your nomination. Recently the Australian government introduced “Binding Nominations”. These are still rare and have to be freshened up every 3 years – otherwise they just become non binding on the trustee.

How do you lose Singaporean residency?

(a) Statutory impediments to loss of residence.

A person who is physically present or is employed (other than as a director of a company) in Singapore for 183 days or more is treated as a resident under the Singapore tax laws unless his or her temporary absence from Singapore is unreasonable and inconsistent with a claim to residence status. (Australia also has the “183 day rule” but because of the very high personal and company tax rates many “residents” seek to defeat the rule. Consequently the Australian government has come up with many other rules to bolster the “183 day rule”.)

(b) Judicial and administrative rules.

There are no precedence case laws in the interpretation of residence rules.

If an individual is present in Singapore for a period which covers at least 3 consecutive years of assessment, the normal administrative practice of the Comptroller is to treat the individual as resident for all 3 years, even though the number of days spent in Singapore during the first and the last years may be less than 183 days.

An individual who is a Singapore citizen or permanent resident is generally assessed as a resident even if he or she has stayed in Singapore for less than 183 days in the year preceding the year of assessment unless he or she:

(a)   leaves Singapore for a substantial period;

(b)   establishes a permanent home in another country; or

(c)   demonstrates a firm intention not to return to Singapore.

Wills and Syariah Law in Singapore

Some of the Singaporean rules mentioned don’t apply to a Muslim. Generally, Muslims can only dispose off or give away 1/3 of the estate. But the giving away of 1/3 of the estate has to be with the consent of Islamic heirs of the deceased. Under S115(1) of the Administration of Muslim Law Act, 1985, the beneficiaries are bound to apply to the President of the Syariah Court for an Inheritance Certificate to establish the share of each beneficiary.