NRAS

The National Rental Affordability Scheme (NRAS)

About NRAS

 

The National Rental Affordability Scheme is an Australian Government commitment to invest in affordable rental housing. The scheme addresses the shortage of affordable rental housing by offering tax-free financial incentives to investors, so that the dwellings can be rented to low and moderate-income households at below current market rates for a period of 10 years. The aim is to:

 

Increase the supply of new affordable rental housing.

Reduce rental costs for low and moderate, income households.
Encourage large-scale investment and innovative management of affordable housing.


Many Australian families have been seriously impacted with the growing cost of housing and rents considerably increasing over the last few years. The Government havs committed to stimulate the supply of up to 35,000 new affordable rental dwellings in Australia by the 2014/2015 financial year, with a further 15,000 thereafter.

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Who benefits from NRAS?


NRAS is not a public housing scheme or welfare program, it is a tax-free incentive to induce more private investment in affordable housing; the sector between social housing and full priced private rental accommodation.


The scheme was created to encourage large-scale investment in affordable housing with the aim, to supply lower-rent dwellings, making housing more affordable for Australia’s key infrastructure workforce, such as, childcare workers, teachers, police officers, fire fighters, paramedics, nurses and other key workers in the community.

 

The dwellings are rented to eligible, low and moderate-income households that earn less than a prescribed amount. Currently, a single person can earn up to $44,128 per annum, increasing to $104,913 per annum for a couple with three children. The scheme allows for tenant salary increases of 25 per cent. With this allowance a single person can earn up to $55,160 and this family could earn up to $131,141 for 2 years before they become ineligible for the discounted rent. For further details refer to www.environment.gov.au.

 

Approximately 1.5 million households are eligible to rent NRAS properties.

 

As well as increasing the supply of affordable housing in Australia, it is also a tax-free, profitable investment for participants. To comply with the government requirement, the investor reduces the rent by 20% below the market rental value to qualifying individuals and families, in return for significant tax-free credits, per dwelling, per year for 10 years. The annual incentive is tax-free, indexed annually to the rental component of the Consumer Price Index (CPI), and complimented by existing taxation arrangements.

 

 

 

 

Investors

 

 

 

 

 

Contact

The incentive is currently $9,981 per annum, a minimum of $100,000+ over 10 years and comprises:

 

 

 

 

A Federal Government contribution of $7,486 per dwelling, per year as a refundable tax offset payment, available in July. Not-for-profit organizations, such as, Ethan Affordable Housing is endorsed as a charity by the Australian Taxation Office so the investor can choose to receive the incentive as a cash payment.

 

A State or Territory contribution of $2,495 per dwelling, per year in a cash payment, available in September.

 

Australian Taxation Office

 

NRAS presents a profitable investment opportunity for investors while also increasing the supply of affordable housing in Australia.

 

 

Benefits of investing in a NRAS investment property

 

An annual tax-free incentive that is indexed annually for 10 years.
The NRAS incentive is not available to standard residential property investors.

 

Socially responsible investing providing affordable rental housing for qualifying key workers, such as, childcare workers, teachers, police officers, fire-fighters, nurses and paramedics.
Increased income.
A positive cash flow investment property.
Potential investment earnings from the growth in the property value.

 

Reducing your tax burden through potential negative gearing benefits and positive cash flow at the same time.

 

 

Possibly increase the negative gearing benefit by applying expenses and non-cash deductions and allowances against a lower assessable rental income as the property is rented at 80% of the current market rate.
Tax deductions on interest payments.
Tax deductions on property depreciation.
A choice of properties throughout Australia from various developers.
Ownership of a newly built dwelling.

 

'Turn Key’ inclusions so the dwelling is ready to be tenanted on completion

(Refer to FAQ for an inclusions list).

 

Possible reduced vacancy rates over the 10 years due to the dwellings rented at 20% below market rates making the property most sought after by tenants.
It is a flexible system – investors may exit the scheme at any time without incurring exit penalties.

 

 

The property can be sold with remaining NRAS incentive to another investor who undertakes to comply with the scheme or an equivalent dwelling can be offered for the remaining part of the 10-year period.
The property can be sold without the NRAS.


 

The Australian residential rental market represents a good long-term investment with the opportunity for significant capital gains. Investors in the scheme benefit from cash and capital growth returns that can be superior to traditional property investment.

 

Under the National Rental Affordability Scheme, investors receive a tax-free incentive per annum (indexed annually) for each approved dwelling, rented at 20% below current market rent for a 10-year period. In certain markets, compared with a traditional property investment the tax-free incentive can provide a better cash return than charging the current market rent on the property.