NRAS National Rental Affordability Scheme

What is National Rental Affordability Scheme or NRAS?

  • It is a long term commitment by Australian Government to invest in affordable rental housing
  • Government seek to address shortage of affordable rental housing with the aim to:-
    • Increase supply of new affordable rental housing
    • Reduce rental cost for low to moderate income households
    • Encourage large scale investment and innovative management of affordable housing
  • The Australian Government is committed to stimulating the construction of 50,000 high quality homes and apartments. Up to 35,000 new dwellings will be supported in the years up to 2014-15, with a further 15,000 dwellings to be supported beyond 2014-15.
  • NRAS is not a public housing program; it is a tax incentive to induce more private investment in the lower price range of the residential construction market, targeted at large-scale investors seeking to improve returns on their direct property investments
  • NRAS provides a substantial annual tax-free financial incentives per dwelling to investors
  • Approved NRAS investors will be eligible for tax-free incentives (which is not available to conventional properties), with each NRAS approved individual residential property attracting an annual National Rental Incentive for 10 years
  • Approximately 1.5 million households are currently eligible to rent NRAS properties, ensuring a strong ongoing demand for NRAS properties and a large pool for investors to choose from


How does NRAS Work?

  • Government offers annual tax-free financial incentives per dwelling to investors to build & rent approved dwellings to low & moderate income households at 20% below market rental rates for 10 years
  • The above annual incentive is called the NRAS Incentive or National Rental Incentive
  • The annual NRAS Incentive is income tax-free, indexed annually to the rental component of CPI and is complemented by existing taxation arrangements including depreciation.
  • The annual NRAS Incentive currently amount to $9,524 comprises of:-
    • Australian federal government contribution of $7,143 per dwelling per year for 10 years as refundable tax offset certificate or cash payment, that is paid in July proceeding each NRAS year, and
    • State or Territory government contribution of $2,381 per dwelling per year for 10 years as a direct payment, that is paid in September proceeding each NRAS year
  • NRAS year runs from 1st May until 30th April of each year, and each property is audited in the first 2 weeks of May, so that incentives can be paid in July & September respectively


Who manages the NRAS scheme?

The Department of Sustainability, Environment, Water, Population & Communities is responsible for the implementation and ongoing management of NRAS, in consultation with the Australian Taxation Office

  • The Australian federal government is working closely with State and Territory governments and all providers/investors  in the ongoing management & implementation of NRAS


What are the commercial benefits of investing in NRAS properties?

  • Presents new investment opportunity for developers & investors
  • Intended as a commercially profitable investments for participants
  • Increases supply of affordable housing
  • Residential property rental market represents good long term investment with opportunity for significant capital gain & rental yields


Who benefits from the scheme?

  • NRAS tenants are typically key workers such as childcare workers, nurses, police officers, fire-fighters and paramedics. In addition to their salary or wages, many NRAS tenants may be eligible for Commonwealth Rent Assistance, a fortnightly payment that assists with rent costs.
  • Eligible individuals & families will be able to rent NRAS dwellings at 20% below market rates
  • Investors who purchased NRAS dwellings may benefit from enhanced cash returns from the annual rental incentive


How do returns on NRAS investment property compare with conventional residential investment property?

Under NRAS, investors receive a tax-free incentive of $9,524 per annum for 10 years

  • Incentive $9,524 is approx. $183.15 per week
  • Tax-free incentive can provide better cash return than charging market rent
  • Conventional investment property, for example,
    • receives rent of $400 per week or $20,800 per year
    • say for simplicity calculation, less 30% tax gives net $14,560 income per year
  • NRAS investment property, for example,
    • receives rent of $320 per week (at 20% lower than market rent) or $16,640 per year
    • say again for simplicity calculation, less 30% tax gives net $11,648 income
    • however with the tax-free National Rental Incentive of $9,524 added back, the total income is now $21,172 per year


Can I sell my NRAS property or remove it from the scheme & rent it at market rate?

  • NRAS dwellings are private property. No Government has caveats or claims over NRAS properties
  • Investors can sell their dwelling or cease their participation prior to the 10 year NRAS term, without incurring any exit penalties
  • A dwelling can be removed from NRAS scheme and sold in the open market without obligation
  • A dwelling can be sold to another investor who undertakes to comply with NRAS obligation
  • An owner can provide an equivalent dwelling that can be offered as a substitute dwelling for the remaining part of the 10 year period
  • At the end of the 10 year NRAS period, properties can be sold on open market or continue to be leased at full market rental


What are the characteristics of NRAS dwelling?

  • Design & quality of NRAS dwellings compares favourably with any other private market conventional non-NRAS dwelling. Typically, they are indistinguishable from any other dwelling
  • Rigorous selection criteria are applied to the location, design and amenity of NRAS dwellings to ensure they are built to the highest standards in compliance with State, Territory & Local Government planning and building codes
  • Located in specific locations where there are undersupply of affordable accommodation, sought after areas with low vacancy rates
  • Locations are selected due to availability of amenities including public transport, access to shops, schools and employment hub


What is an eligible NRAS dwelling or criteria?

  • The dwelling must be brand new, that is not previously tenanted
  • The dwelling must be rented at a minimum of 20% below market rent
  • The dwelling must be self-contained, that it must be demonstrated that a tenant(s) would be able to live independently.


What is the typical length of lease

Normally it is 12 months lease, using the Real Estate Institute standard lease that is applicable to the state or territory

  • NRAS does not provide tenants with any special rights over & above the relevant residential tenancy legislation in the state or territory


Who can rent NRAS dwellings

  • NRAS tenants are typically key workers such as childcare workers, nurses, police officers, fire-fighters and paramedics. In addition to their salary or wages, many NRAS tenants may be eligible for Commonwealth Rent Assistance, a fortnightly payment that assists with rent costs.
  • Income levels for eligible NRAS tenants are generous & accommodate a range of low to moderate income earners
  • From individuals with income limit $44,128 per annum to couple with three children with household income limit $104,913 per annum, and NRAS allows for tenants salary increases of 25% above income limits

 

Household Type Entry Income Level Upper Income Level to Maintain Eligibility
One Adult $44,128 $55,160
Two adults $61,006 $76,258
Couple with 1 child $75,641 $94,553
Couple with 2 child $90,277 $112,847
Couple with 3 child $104,913 $131,141

 

  •  Tenancy managers review tenancy applications and maintain waiting lists for NRAS homes
  • Tenants are selected by investors & their tenancy manager, where final decision is always made by investors
  • All of the same rights & obligations of the standard applicable tenancy laws in each state or territory are applicable to both tenants & landlord
  • Tenants can similarly be evicted should they not comply with the tenancy laws


Who are NRAS Tenancy Managers & what are their role

  • NRAS Tenancy Managers may be community housing provider or private real estate agent appointed by the Government
  • Tenancy management services must comply with residential tenancy legislation of the state & territory
  • Tenancy managers roles include:-
    • Undertake initial property inspection report
    • Interview potential tenants and receive tenancy applications
    • Provide property management and maintenance functions
    • Manage ongoing tenancy of NRAS dwelling
    • Collect rent from tenants and disperse rent receipts to landlord
    • Report all required information to approved participant
    • Retain tenancy compliance records for at least 5 years
  • The property management fees charged by the tenancy manager is 10% of the rental
  • Approved Participants should note that failure by tenancy manager to comply with the requirements of the scheme may impact on the investor’s rights to receive the annual National Rental Incentive, and may result in allocation being revoked.


Who are Approved Participants

Approved Participants are responsible for lodging applications with the Government for dwellings to be approved for NRAS

  • After dwellings has been approved & sold, Approved Participants is then responsible for the administration of the scheme, ensuring compliance and thereby ensuring the investor is eligible to receive the NRAS incentive and benefits


Why choose FIRST LEAD and associates for NRAS Approved Properties

  • Direct access to residential property investments in a highly sought after location
  • Reduce your tax burden
  • Earn at least $109,228 in tax-free income from government incentives over 10 years period
  • Potentially enjoying positive cash flow from day one
  • Access to finance strategy advice to help you purchase the property using little or none of your own money
  • Be supported by experienced team of mortgage brokers, conveyancers and property managers
  • Making socially responsible investments that benefits valuable members of the community
  • Enjoy increased equity as property grows in value
  • Build your property portfolio
  • Our system is structured to support you through the whole process.