property investment

Discussion – National Rental Affordability Scheme

National Rental Affordability Scheme, or NRAS, is a government scheme to help low to moderate income people with an opportunity to rent homes at a lower rate.

Can investors like us take advantage of that? Let’s find out.

Tl; dr;

  • NRAS pays landlords with an incentive that is 20% or above market rent to offset what tenants need to pay.
  • NRAS commenced on 01 July 2008, and has been through 5 calls for applications.
  • There will be NO further call under this scheme in the foreseeable future.
  • NRAS targets low to moderate income tenants, and targets medium to large-scale investment body (usually 100 or more houses).
  • Payments usually comes in a form of refundable tax.

What is National Rental Affordability Scheme?

NRAS

Source: knowledgesource.com.au

In Layman’s terms, the government will pay a portion of rents to the landlords, and approved tenants will pay the remaining.

E.g. If market rentals is $1,000 per month, Australian government will commit to pay at least $200 per month, and the tenants only need to pay the remaining $800.

NRAS started on 01 July 2008, and was planned to go through 5 calls for applications. However the last call did not commence since the Scheme only supports 38,000 allocations. I.e. Only 38,000 properties can be approved for this scheme.

Who can benefit from this Scheme?

beneficiary

Source: travelinsurancegungei.blogspot.com

Low to moderate income tenants need to be approved to rent  the properties that were approved for this scheme. This means there are 2 separate approval processes that applies to the tenants and the properties. Tenants only need to pay up to 80% of the market rent, and the lowest is 20%.

E.g. If market rent is $1,000; tenants only need to pay between $200 to $800, depending on the approved finance.

The scheme aims to organisations that have about 100 or more houses, provides them with a financial incentive for up to 10 years. This means individual investors will not be able to apply for the scheme directly. However if they buy properties that are already approved, then the scheme will go with the properties.

Financial benefits come in the form of refundable tax credits. The amount of the tax credits is available here.

One thing to note is that the tax credits adjusts for inflation. Which means the amount of credits will be different each year, protects the investors from inflation.

Summary

NRAS is a scheme to help low to moderate income Australian to be able to rent their homes by providing financial incentives to landlord.

It is no longer open to apply in the foreseeable future. However if individual investors buy an approved property, the scheme will follow the dwelling.

By Tuan Nguyen

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