What is NRAS?
The National Rental Affordability Scheme ( NRAS ) was set up by the Government in 2008 and launched by treasurer Wayne Swan, to overcome the huge housing shortage here in Australia. The housing crisis is expected to peak in 2013 with a shortage of as many as 213,000 homes expected. The scheme benefits both tenants and investors, with fixed rental contracts for tenants and investment tax breaks for investors.
The tax incentives for investors provides Annual Tax Free Rental Incentives for a period of ten years. By offering the incentives, the scheme aims at increasing the number of rental properties available for moderate income households, such as teachers, nurses and police.
- A property must be held in the NRAS for 10 years
- A property must be rented at a discount at least 20% below market rent (investor gets tax incentives to make up the difference)
- A property can only be tenanted by an eligible tenant.
- An annual Statement of compliance must be submitted.
- Use of specialist housing tenancy managers to ensure compliance with NRAS.
By purchasing an NRAS property, as an investor you will be eligible for incentives of up to $10,350 per year for the next ten years. The Federal Government incentives are paid in the form of a refundable tax offset and is included in your tax return. The State /Territory Government incentive is maid in the form of a tax-free cash payment and is historically paid in September each year.
The best thing to do in relation to the tax incentives is talk to one of our qualified consultants or your accountant to get a feel for how this can affect your personal situation.
NRAS is Not Social Housing
The National Rental Affordability Scheme is not designed to be a substitute for social housing. On the contrary, tenants are vetted on income and stability. NRAS tenants can earn up to $129,960 per annum. NRAS is geared toward helping tenants in key workers (service industry) over 55′s and families. With NRAS there is controlled selection of tenants and properties are advertised to tenants the same as properties that are not in the scheme.
With social housing, there is no control over the rate of the rental, or the government subsidies provided, whereas with NRAS the market rate of rent is determined by an independent property valuer.
So why invest in NRAS?
The benefits are simple
1. Cash Flow Positive Investment
2. Improved Rental Yield
3. Minimum annual tax incentive of $10,350 for ten years will out perform a normal rental property for rental yields.
4. The Rental Incentive is income tax free, indexed to the rental component of the Consumer Price Index (CPI) and is complemented by existing taxation arrangements which include depreciation.
5. There is a reduced risk profile, with a large pool of eligible tenants and rents at 20% below market value decreasing rental vacancy.
6. There is a certainty of annual tax incentive contributions from the Government for the next ten years.
7. Tenants are contracted for longer terms and as an investor you can be more selective of your choice of tenant.
8. Secured income stream for 10 years.
9. Maintained and Managed
10. $120,000 Plus Tax Credits for 10 Years.