The NRAS property scheme is a government incentive. It stands for National Rental Affordability Scheme (NRAS).
A sector of Individuals, Couples or Families that have good jobs but struggle with Rental Affordability now have the ability to rent the style of accommodation that suits their needs but at a discount. The government is making rent more affordable under this scheme. The incentive to renters is a rental discount of 20%. To compensate you as the landlord, the government provides a Tax Credit of $8,394.10 per year linked to Rental CPI going forward over a period of 10 years. This Tax Credit could amount to nearly $100,000 over the next 10 years.
Only newly built residences meeting set criteria can qualify as an NRAS properties under this scheme. Criteria for inclusion as an NRAS property are proximity to schools, public transport and location. The Tax Credit, thus, increases the rental yield on NRAS properties.
Example on a rental income of $350pw
- Qualifies the tenant with a $70 discount (20%)
- The tax credit of $8,394.10 divided by 52 weeks = $161 pw
- The difference in your pocket in this example = $91 pw surplus
Utilising NRAS is a good fit for SMSFs wishing to enter the property market. Most properties would be positively geared right from the start. To see NRAS explained in more detail, click here.
To visit the government website on this scheme, click here.
Remember, Superannuation Warehouse will set up the SMSF first and then put into place a Bare Trust and Corporate Trustee structure. It is important to have these structures in place before the property purchase to ensure stamp duty is not levied twice.
Lastly, there are many property spruikers operating in the NRAS area. There are big commissions involved in signing clients up into these schemes. The banks are aware of them, so it can be difficult to get financing.