The National Rental Affordability Scheme ('NRAS') is a Federal Government initiative that provides tax free incentives for the provision of new rental properties, which are rented between 20-25% below market to 'eligible' tenants. These tenants are predominantly 'essential workers' such as nurses, teachers, fire fighters, police officers, and public servants.

 

In return for renting their properties at below market rentals, investors receive $9,140 in annual tax free incentives, which increase with inflation (specifically, the rate of national rental growth) over the 10-year period the property can qualify for NRAS.

 

Provided an investor purchases an NRAS property for less than $450,000, the NRAS incentive will not only compensate for the loss rent but will also fully offset all other property expenses (eg, interest, rates, insurance etc) to make the property 'positively cash flowed'. Indeed, an investor on a 30% tax rate would expect a $350,000 NRAS property to be positively cash flowed by approximately $2,000 per annum.

 

Besides being offered at a discounted rental, NRAS properties also have to be audited by an approved NRAS participant (which would have initially put the property into NRAS). The NRAS participant is responsible to ensure that the tenant is and remains eligible to rent the property over time (eg, does not receive a significant pay rise that takes them above the NRAS income threshold), and charge approximately 8-10% of the NRAS incentive to provide this audit.

 

Other than the discounted rent and audit, NRAS properties are otherwise identical to a regular (usually negatively geared) property - tenant applications can be rejected by the landlord, a regular residential lease must be signed and a bond provided, landlords can choose their own rental agent.

 

Finally, properties can be removed from NRAS at any time (without penalty) and be sold to an owner occupier or investor though once removed a property can not be returned into NRAS. Properties can also be sold with NRAS to another investor.

 

 

The below table provides a summary overview of the National Rental Affordability Scheme . For more information, please read the January 2010 NRAS article by Omega Investments or contact us.