Purchasing an NRAS investment property
NRAS is short for National Rental Affordability Scheme.
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
The government aims to achieve this by providing a tax incentive for investors in NRAS properties in return for the properties being rented at a discounted rate. The NRAS scheme is not housing commission or social housing. NRAS properties are rented to private individuals and families with incomes of up to $108,169 pa. (And even higher upper limits of $135,212 pa. see the government NRAS documentation)
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.
The Scheme offers annual Incentives for ten years. The two key elements of the Incentive are:
A Commonwealth Government Incentive currently of $7,486 per dwelling per year as a refundable tax offset or payment; and
A State or Territory Government Incentive currently of $2,495 per dwelling per year in direct or in kind financial support.
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.
For more information on the benefits of investing in NRAS and FAQ’s please click here