NRAS - Access over $100k Tax Free on an Investment Property

NRAS is the Commonwealth Governments National Rental Affordability Scheme (NRAS), a scheme that allows property investors to purchase a new investment property with a ten year term.

What is the NRAS?

The National Rental Affordability Scheme, or NRAS, was introduced in 2008. It helps lower income earners with more affordable rental accommodation, 20 per cent below market rent. Through the NRAS, the government also encourages large-scale investment and aims to boost housing supply. Although it seems like it may only benefit renters, this isn't true. It's also a great option for anyone looking to make a move into property investment.

The properties are available nationally and through various projects including units, townhouses and villas. The properties are no different to the ones next door to you that you would otherwise purchase. The properties range from $300,000 to $650,000 in price making an affordable consideration for an investor to add to their portfolio.

This Government scheme was created to reduce the rent payable by "key workers" within the community, such as police officers, nurses, childcare workers, ambulance service workers, paramedics, teachers, fire-fighters and other critical community members. The policy can also assist other eligible tenants such as single parents, apprentices, students, pensioners and retirees as well as family members including brothers, sisters, children, parents and people with disabilities.

How does it work for the investor?

If you purchase an investment property through the NRAS, there are benefits for the investor.

The biggest incentive is related to tax. The annual NRAS incentive is paid to you annually for 10 years. This is adjusted to be aligned with the Consumer Price Index, so it can fluctuate from year to year. At the end of the 10-year period, you will have complete rights to do as you please including renting it outside of the scheme. There will be no obligations to the government through the property. This means you can choose to rent the property at whatever level you see fit as it will no longer be part of the NRAS.

The investor gets a $9,981 tax-free payment from government per annum (indexed to rental CPI running at about 5.2%) This equates to well over $100,000 in tax free contributions over the ten year period. The yield on a NRAS property is typically cash flow positive from the first year.

Along with a secure 10 year period under the scheme, properties are located in great growth regions and are of high quality providing many advantages to a property investor.

What are the criteria?

The NRAS is open to financial institutions, medium to large-scale investors and private developers. Individual investors are also able to purchase NRAS properties – however, this is usually through superannuation funds or property trusts. NRAS properties can be purchased by individual investors from approved developers too.
This means if you're looking to purchase one or two NRAS properties for investment, you'll need to approach an entity that is already applying or has an allocation of NRAS incentives.

Approved NRAS properties are usually brand new and haven't been lived in. They can only be rented out to eligible low-income earning tenants.
As an NRAS property owner, there are a number of ongoing compliance requirements you'll need to stick to to receive your incentive payment. These include keeping the rent at least 20 per cent below market level and not increased more than once a year. You'll also need to use an approved property manager to look after your investment.

  • Properties are located in high-demand areas and are usually close to amenities
  • NRAS dwellings come in all forms – from studios to family homes
  • Demand is usually high so you don't need to worry about lapses in tenancies
  • You can have a guaranteed incentive paid to you each year for 10 years
  • After 10 years it will be just like any other property you own.
  1. After 10 years you won't receive the incentive
  2. Like purchasing any property, make sure the valuation comes in at purchase price. You can order a valuation yourself before you purchase
  3. There's a restricted market for tenants as they need to be eligible
  4. Resale can be complicated if you're looking to sell before the 10 year period ends.

How does it work for the tenant?

NRAS homes are required to be rented to an eligible tenant at a 20% minimum discount to market.

How can I find out more?

To find out more about how NRAS works and if this investment opportunity is for you register here to attend a NRAS webinar.

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