The federal government-backed National Rental Affordability Scheme (NRAS) has fallen under the radar of a lot of investors. But the four-year-old scheme, which provides subsidies to landlords of up to $114,000 over 10 years, should be carefully considered by anyone intending to buy a new or off-the-plan investment property. The NRAS aims to provide 50,000 affordable rental properties by 2014. In return for investors offering rental properties to approved NRAS tenants at rents 20 per cent below market rates, the scheme provides an annual tax-free incentive of at least $9524 for 10 years.
The incentive increases each year in line with the consumer price index and is structured as a refundable tax offset. That means a taxpayer will have the incentive offset against his or her tax bill. If investors have no tax to pay, they still receive the incentive as a refund. There are caveats, though. The NRAS is focused on building new dwellings. Established units and houses are not eligible, and most NRAS approvals so far have gone to projects run by community housing organisations. By harnessing the NRAS, you can produce positive or neutral cash flow early in the life of an investment, as well as low holding costs and capital growth.
The scheme is designed to assist workers such as nurses and police officers. Eligible tenants can earn up to $125,590 a household. Participating investors are still able to claim standard rental tax deductions, such as interest and depreciation, and they have the final say on tenants. Approved properties can be bought by a self-managed superannuation fund. The plus-factor for investors is improved profitability.
Not all lenders will allow you to borrow on NRAS approved properties, contact your Finance Specialist at Red & Co today to discuss your lending requirement and options with NRAS properties on 1300 88 73 28.