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What is the National Rental Affordability Scheme (NRAS Scheme)?
The National Rental Affordability Scheme (NRAS scheme) is an Australian Commonwealth Government scheme aimed at assisting middle to low income earners by providing new affordable rental dwellings over ten years. It provides ten years of incentives to encourage supply of new affordable housing rented at a minimum discount of 20% off Market Value Rent for that housing.
The NRAS year is 1st May to 30th April and the 2012-2013 Incentive is $9,981 per Approved Rental Dwelling contributed by the Australian Government $7,486 as a refundable tax offset and VIC Government $2,495 payment non assessable. The Incentive is indexed annually to the rental component of the Consumer Price Index (CPI) for December.
NRAS seeks to address the shortage of affordable rental housing by offering tax-free financial incentives to the business sector and not for profit housing organisations to build and rent affordable dwellings. Through this, NRAS will:
- increase the supply of new affordable rental housing;
- reduce rental costs for low and moderate income households; and
- encourage large scale investment and innovative management of affordable housing.
The Government set a limit of 50,000 National Rental Affordability Scheme (NRAS scheme) dwellings in Australia. Over 40,000 dwellings have been allocated NRAS, there are only about 10,000 more dwellings to go. So this won’t last forever, this is a short term window of opportunity for investors.
NRAS properties are being constructed in locations with strong population growth and with great infrastructure such as schools, hospitals and job growth to ensure long term tenants.
The criteria the Australian government has set for NRAS properties compliance means that an NRAS property may never be in a “bad” location. However, it’s important to seek professional advice before buying an NRAS 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.
For example, a couple with three children, earning a gross income of $108,169 per annum, is eligible to rent an NRAS dwelling. With the income increase allowance of 25 per cent, this family could earn up to $135,212 for two years before they become ineligible to remain in an NRAS property.
The Investor right
The Investor may sell the Approved Rental Dwelling at any time by giving PH ninety (90) days written notice. The investor may invite an investor who would like to take the rest of the term on.
The Investor may OPT-OUT of the Approved Rental Dwelling at any time by giving PH ninety (90) days written notice.