Despite its introduction back in 2008, the National Rental Affordability Scheme (NRAS) is still being under-utilised by Australian property investors. Overall it’s a highly beneficial scheme for investors, with an approximate $10,000 annual rental subsidy that’s worth taking seriously. If you’re thinking about broadening your portfolio to include NRAS properties, here’s what you need to know about the scheme:
What is it?
The NRAS is a federal government initiative designed to combat the problem of affordable housing. It’s not a public housing program, but rather a tax incentive to encourage private investment in the affordable rental market.
How does it work?
NRAS offers a tax-free incentive to property investors who build and rent dwellings to eligible tenants at a rate that is 20 per cent below the existing market rate. The current annual incentive is set at $9,981 per dwelling, for a maximum of 10 years. This incentive is indexed annually to the rental component of the CPI.
Who can participate?
Individual investors, financial institutions, private developers, not-for-profit organisations and community housing providers, who build, own, finance or manage NRAS dwellings.
How does it compare to conventional property investment?
Essentially the NRAS offers property investors all the benefits of a conventional investment property, with added annual tax-free incentives. NRAS dwellings are still private property (no government holds), and in certain markets the addition of the incentive can provide a better return than market rent. And most importantly, investors can exit the scheme at any time with appropriate notice without incurring any financial penalties. As we say at Silverhall, not all NRAS is good NRAS. The asset needs to be positioned in a growth market, otherwise you will not benefit from an increase in the capital value of your investment.
Want to find out more about NRAS properties? Silverhall provides experienced guidance and strategies for property investors. Book a free investment consultation online or call 1300 662 143 today.