NRAS

Overview of NRAS

With rents to grow at approximately 4% – 7% p.a. over the next two years for most cities, mainly due to lack of building new dwellings, treasurer Wayne Swan launched the NRAS scheme in July 2008.

It is estimated that the upper end in rents will stay flat or fall while the middle and lower ends are expected to grow significantly.

The shortage of houses across Australia in 2008 has been estimated at 85,000 and possibly increasing to 213,000 by 2013.

Background of NRAS

The National Rental Affordability Scheme or NRAS was launched for the purpose of providing assistance and funding to increase the supply of affordable rental dwellings, reduce rental costs to low to mid income earners and to encourage investment on a large scale to provide more affordable housing.

NRAS is expected to supply up to 50,000 affordable rental houses across Australia by 2012, with a further 50,000 to be made available post 2012 at a cost of $623 million.

If the investor reduces the rent by 20% (may vary according to incentive provider) of the market rent, the government will provide an incentive of $9,140 per annum ($6,855 from Federal and $2,285 from the State governments). This payment increases in line with CPI and in 2010 it is $9,140.

Eligible tenants are determined on an income basis with the service industries such as police, teachers and nurses targeted as potential tenants.

The incentives are TAX FREE which means on 41.5% MTR before tax = $13,675 and 31.5% = $11,679. Reducing the rentals by 20% means negative gearing increases along benefits.

Why NRAS Is Not Social Housing

· A family can enter as a social housing tenant earning up to $58,292 whereas an NRAS tenant can earn up to $125,960. NRAS is geared to key workers(service industry), over 55′s and families.
· With NRAS there is control with tenant selection. Advertising for tenants is as in any other normal tenancy arrangement.
· With social housing there is no control over the rental rate charged- the government subsidises the rent and sets the amount, whereas with NRAS the rental rate is set by the market rent and is valued by an independent valuer.

Benefits of NRAS for Investors

· Improved Rental Yields
· The minimum annual $9,140 National Rental Incentive for each rental dwelling will improve rental yields over conventional residential investment properties.
· The national Rental Incentive is income tax free, indexed to the rental component of the Consumer Price Index (CPI) and is complemented by existing taxation arrangements including depreciation.
Reduced Risk Profile

· With rents at 20% below market value and a large pool of eligible tenants, investors can expect reduced vacancy risk.
· With rents at 20% below market value investors can be more selective in their choice of tenant. Certainty of contributions from the Australian and State governments for a period of 10 years.
Further Benefits

· Government Subsidised Property Investment
· Secured Income Stream (10 Years)
· Cash Flow Positive Investment
· Maintained and Managed
· $90,000 Plus Tax Credits Over 10 Years

Want to Learn More About Investing in NRAS, contact us for an information booklet.