It is a win-win situation: developers and investors make money and the scheme is expected to deliver up to 50,000 affordable rental homes Australia wide by 2016.

The National Rental Affordability Scheme, set up by the Rudd government in 2008, offers tax-free financial incentives to build and rent dwellings to poorer households at rates below market value for 10 years. It creates a new residential asset class for property investors.

Eligible participants include financial institutions, investors, private developers, not-for-profit organisations and local governments. They may build, own, finance or manage the NRAS dwellings.

Under this scheme, owner is allowed to select the tenant, not the governing body.

The dwellings must be rented to low or moderate-income households at least 20 per cent below market rates. For the investors and developers, the annual incentive is tax-free income, indexed annually and complemented by other benefits such as depreciation.

The incentives include annual payments of $7143 and $2381 per dwelling from the federal and state governments respectively.

The benefits of investing in an NRAS-approved property were varied. They include an increase in income, potential for big capital gains, negative gearing benefits and positive cash flow at the same time, tax-free income and tax offsets indexed for 10 years, and tax deductions on interest payments and depreciation.

Investors can earn at least $109,228 in tax-free income from government incentives for every property bought and held for 10 years.

The Best part, you have the flexibility and can opt out of the scheme at any time.


Useful links:

National Rental Affordability Scheme – Information for investors

Fact sheet: National Rental Affordability Scheme Incentive

Fact sheet: Tenant Eligibility