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Despite the National Rental Affordability Scheme (NRAS) gaining traction in Australia’s regional cities, many potential investors remain confused around what the private investment incentive offers. So what exactly does it provide?
Blogger: Kim Clarke, managing director, Xcel Properties
NRAS is a long term commitment by the Australian Government to stimulate private investment into the low-priced residential property market. The tax incentive not only provides an opportunity for private ‘mum and dad’ purchasers and businesses to get their foot onto the investment ladder, but also addresses the issue of an affordable rental housing shortage.
The scheme’s minimum risk is also a main driver for first-time investors. Affordable rental properties in regional cities such as Mackay have been scarce for the past 10 years, which guarantees demand for these properties.
Incentive from NRAS is received in the form of an annual tax refund offset from the Australian Government. This is set at $7,762.50 per dwelling in line with the property being rented for 10 years at a rate at least 20 per cent below market value. Queensland investors receive an additional cash payment of $2,587 per dwelling directly from the State Government, totalling the incentive to over $10,000.
Despite the obvious advantages of the scheme, there are still areas of confusion and misconceptions around what this incentive offers. At Plantation Palms, we’ve recently received an influx of potential investors enquiring about further education, especially around topics such as who will be living in their home, and who will be controlling their investment.
The top five NRAS misconceptions are as follows:
1. Misconception: NRAS properties are used for social housing.
Truth: These affordable rental dwellings are private property and the investor/owner has complete control over who occupies their property. A couple with three children can earn $109,264 pa (rising to $136,580) and still qualify to rent.
2. Misconception: NRAS investors are large business groups only.
Truth: Potential participants in NRAS include everyone from ‘mum and dad’ investors, financial institutions, non-profit organisations, private developers, and community housing providers.
3. Misconception: NRAS property schemes are operated by government.
Truth: Although the NRAS is an initiative funded by the Australian Government, it is an approved scheme operator that puts the operating agreement in place between them and individual investors. This can vary widely and investors are encouraged to thoroughly review the provisions contained in their agreement and seek help from a professional before finalising an investment.
4. Misconception: Tenancy conditions change when it comes to NRAS renters.
Truth: NRAS homes may be funded by the incentive for up to a period of 10 years and tenants are entitled to the same rights given as tenants of relevant residential tenancy law in their respective State or Territory.
5. Misconception: Grant payments remain unchanged despite increased rental value.
Truth: The NRAS incentive is paid per dwelling, and is indexed each year (Dec – Dec) in line with movements of the Rents component of the Consumer Price Index. This is calculated using the weighted average rate of the eight capital cities housing component, and is effective from 1 May 2013.
About Kim Clarke
Kim Clarke is founder and Managing Director of Xcel Properties with over 40 years’ experience in the real estate and property development industry.
Specialising in Regional Queensland development, Kim’s current focus sits with his latest project Plantation Palms. Based in one of the state’s fastest growing regional cities – Mackay – this community will grow in line with the Government’s projected 55% population increase by 2031.