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FAQ on NRAS


Frequently Asked Questions about NRAS

Here you'll find the answers to some of the most frequently asked questions about Empower Housing, NRAS, Tax Offsets and our services. If you can't find the answer to your question below, please contact one of the Principals.

Why should I invest in an Empower Housing property that includes the NRAS housing bonuses over a traditional property?

The benefits of investing in an Empower Housing investment property include:

For each approved dwelling, both the Fed and the State Gov'ts pay buyers/owners an annual combined tax-free NRAS incentive of $11,048 (2016/2017)

Owners receive these incentives each and every year for 8+ years. Visit the Gov't NRAS website for more.

Empower Housing packages Dual-Occupancy homes throughout Western Australia and includes $22,096 in NRAS housing bonuses per year to the owners.

NRAS property from Empower Housing is either cash-flow positive or very cash-flow positive!

Much higher rental yields are achievable as a result of the inclusion of NRAS incentives from Empower Housing.

Who manages the scheme?

The Department of Families, Housing, Community Services and Indigenous Affairs manage the scheme, in consultation with the Australian Taxation Office (ATO). To ensure the objectives are met, the Australian Government work in conjunction with the State and Territory Governments, not-for-profit housing providers, property developers, investors, and financial institutions.

What do investors get when buying from Empower Housing?

You get NRAS! NRAS offers substantial annual housing bonuses for every dwelling built under its auspices.

Empower Housing's investors need to apply for NRAS Incentives, and if offered, must agree to rent approved dwellings at a rate that is at least 20 per cent below prevailing market rates, to low and moderate income households.

The annual income-tax free NRAS Incentive is currently $11,048 per dwelling, and is indexed each year to the rental component of the CPI.

The Incentive comprises:

  • an Australian Government contribution of $8,286 per dwelling per year (as a refundable tax offset or payment); and
  • a State or Territory Government contribution of $2,762 per dwelling per year (in direct or in-kind financial support).

The Incentive provided under the Scheme assists investors and property developers to work up proposals that offer an attractive and competitive rate of return.

The Government is committed to ensuring that the full value of the NRAS Incentive is passed to all investors. Prospective investors are encouraged to talk to the Australian Tax Office before finalising their investment structure or applying for NRAS Incentives, to ensure this policy objective is achieved.

The Australian Government has no legal or equitable claim over an NRAS property.

Benefits of investing in NRAS with Empower Housing

  • Empower Housing's NRAS investors can expect to significantly benefit from the annual NRAS Incentive, higher rental yields and capital gain
  • NRAS is intended to be a commercial, profitable investment for participants, while also assisting Australia to increase the supply of affordable housing
  • With higher returns on direct residential property than returns on office or industrial property over the last 10 years, residential property can be a profitable investment
  • While global house prices have fallen substantially globally, the Australian housing sector has shown resilience, primarily due to strong fundamentals – low vacancy rates, high population growth, insufficient housing stock, high employment and sound lending practices
  • Demand for residential property is high with the National Housing Supply Council’s State of Supply Report 2010 estimating a current housing supply deficit of 178,400 homes across Australia
  • Partly due to the shortfall in supply, the residential rental market represents a good long-term investment. Independent financial modelling of the NRAS Incentive shows that it can provide market rates of return at levels that are strongly competitive with other asset classes
  • Compared with a conventional residential investment property, in certain markets the NRAS Incentive can provide a better cash return to investors than the receipt of full market rent
  • In addition, investors are able to apply property expenses and non-cash deductions and allowances against a lower assessable rental income, increasing the negative gearing benefit
  • NRAS can counterbalance the risk and volatility of equity markets and assist in providing a balanced portfolio. It offers great flexibility, with investors encouraged to develop portfolios with diverse dwelling types across different locations
  • It is estimated that more than 1.5 million Australian households are eligible to rent NRAS properties

How can Empower Housing's investors participate in NRAS?

  • Empower Housing provides interested investors with their NRAS Incentives and are included in the investment property being purchased
  • Many Empower Housing investors will require finance to help purchase an NRAS property and we provide the finance as required

Who looks after the Property and tenant management?

As with any private investment property, there are a range of property and tenant management services that need to be performed for all NRAS properties.

NRAS investors must appoint a tenancy and/or property manager to provide services including selection of tenants and periodic assessment of their ongoing eligibility to rent an NRAS property, as well as property maintenance. Full details are provided to owners when the property is tenant-ready.

Standard State and Territory residential tenancy laws apply to NRAS properties just as they do for any private residential investment. This includes laws applying to registration and licensing requirements for tenancy managers.

NRAS tenants and landlords are regulated under State and Territory tenancy laws. The same rules regarding evictions, maintenance obligations and responsibilities of tenants apply to NRAS tenants as they do to other tenants in the private market.

Who are these NRAS tenants for my property?

NRAS tenants tend to be key workers, such as childcare workers, nurses, police officers, fire-fighters and paramedics. It is estimated that 1.5 million Australian households are currently eligible to rent NRAS properties.

Investors can pick any tenants for NRAS properties as long as these tenants do not exceed a certain income threshold.

Income levels for eligible NRAS tenants are generous and allow for tenant salary increases of 25 per cent above the entry income limit.

What are some more of the key facts about NRAS?

  • NRAS dwellings are private property. No Government holds caveats or claims over NRAS properties
  • NRAS homes can be bundled with non-NRAS properties: they may be only a minority of a new multi-storey development, with other properties sold off-the-plan to homebuyers and individual investors
  • NRAS dwellings can be sold without penalty during the 8+ year holding period:
    • a dwelling can be sold to another investor who undertakes to comply with NRAS obligations; or
    • an equivalent dwelling can be offered as a substitute dwelling for the remaining part of the 8+ year period
  • At the end of the NRAS 8+ year period, properties revert to full control of the investor, who has no ongoing obligations to the Australian Government
  • Where dwellings are approved under NRAS, investors should be aware that this does not mean that the Australian Government endorses, guarantees or secures the investment in any way
  • The Australian Government has made a 8+ year commitment to NRAS. The Scheme is managed and regulated under the legislative framework provided through the National Rental Affordability Scheme Act 2008

When did NRAS start?

The NRAS started on 1 July 2008 and impacts on income tax assessments for the 2008-09 and later income years.

What NRAS incentives are provided through the tax system?

The Federal Government contribution or incentive is paid in the form of refundable tax offsets for complying investors who can claim their entitlement to the tax offset using one of the following methods:

  • in their annual tax return
  • by lodging a short-form application if they are an income tax exempt entity who would not ordinarily lodge a tax return.

What is a refundable tax offset?

Most tax offsets can only reduce the amount of tax you pay to zero - that is, if your tax offsets are greater than the amount of tax you are liable to pay, you do not get a refund of the excess amount. However, there are some exceptions to this general rule. These exceptions are classed as refundable tax offsets.

Refundable tax offsets can reduce the amount of tax you are liable to pay to an amount less than zero, which results in a refundable amount.

The NRAS tax offset is a refundable tax offset.

What are State and Territory Contributions?

The state and territory contributions you receive (whether directly or indirectly, such as through an NRAS consortium of which you are a member) in cash or in-kind for participating in the NRAS are non-assessable and non-exempt for tax purposes. This means they are not included in your assessable income.

Q&A’s

Disclaimer: Accessing and using any information from this site is on the condition you read and agree to the following. Before making any financial commitment to any property you should seek professional advice from a qualified and registered financial advisor. While every attempt is made to keep the information accurate and current, this site should be used to locate properties of interest to carry out further investigation as to the viability and suitability of the investment property to your personal situation. Indicative returns on investment are just that ‘indicative’ being based on information provided from third parties in regard to sale price and expected rent to be obtained. They are not deemed to be the final return once all other costs e.g legal fees, stamp duty, rental fees, utilities connections and the like associated with buying a new home are added in. Using links from this site to other web sites and the like means you are accessing information from sites we have no control over, we will not be held liable for any loss incurred from the use of information from this site and outbound linked sites. Management of Empower Housing Group and Empower Housing Group WA April 2014.

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