National Rental Affordability Scheme0104.nccdn.net/1_5/121/0b4/2f2/NRAS-Brochure.pdf · The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian

National RentalAffordability Scheme

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What You’ll Learn in This Report:

• HowtheGovernmentwillpayyoutaxfreeincentivesforthenext10yearstobeaninvestorinnewpropertyinAustralia.

• ThebenefitsofpurchasinganNRASproperty.

• HowtheGovernmentwillpayyoutaxfreeincentivesforthenext10yearstoinvestinnewresidentialproperty.

• Howtomakeyournextinvestmentpurchasecashflowpositive.

• Howtomakeyourpropertythemostsoughtafterbytenants.

Contents

WhatYou’llLearninThisReport: 2

NationalRentalAffordabilityScheme 3

AbouttheScheme 3

TheBenefitsofInvestinginNRAS 5

EligibleDwellingsTenants 8

TenancyManagers 11

WhoaretheApprovedParticipants? 12 WhychoosetheMotionPropertySolutionsNRASApprovedPropertyOpportunity?` 13

IllustrativeExample-NRASCalculation14

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Disclaimer:Theinformationcontainedinthisdocumentisofageneralnatureonlyanddoesnottakeintoaccountyourparticularobjectives,financialsituationorneeds.Accordinglytheinformationshouldnotbeused,relieduponortreatedasasubstituteforspecificfinancialadvice.Whileallcarehasbeentakeninthepreparationofthismaterial,nowarrantyisgiveninrespectoftheinformationprovidedandaccordinglyneitherMotionPropertynoritsemployeesoragentsshallbeliableonanygroundswhatsoeverwithrespecttodecisionsoractionstakenasaresultofyouactinguponsuchinformation.

National Rental Affordability Scheme

About the Scheme

What is the National Rental Affordability Scheme?TheNationalRentalAffordabilityScheme(NRAS)isalongtermcommitmentbytheAustralianGovernmenttoinvestinaffordablerentalhousing.NRASseekstoaddresstheshortageofaffordablerentalhousingbyofferingtax-freefinancialincentivestothebusinesssectorandcommunityorganisationstobuildandrentdwellingstolowandmoderateincomehouseholdsatbelow-marketratesfor10years.Itaimsto:

• Increasethesupplyofnewaffordablerentalhousing;• Reducerentalcostsforlowtomoderateincomehouseholds;

and• Encouragelargescaleinvestmentandinnovative

managementofaffordablehousing.

TheGovernmenthascommittedapproximately$1billiontotheSchemeoverfouryearstostimulatethesupplyofupto50,000newaffordablerentaldwellings.

How does NRAS work?NRASprovidesaNationalRentalIncentivetothebusinesssectorandcommunityorganisationstobuildandrentdwellingstolowandmoderateincomehouseholdsat20percentormorebelowcurrentmarketrates.

TheannualIncentiveisincometax-free,indexedannuallyandcomplementedbyexistingtaxationarrangementsincludingdepreciation.TheIncentivecurrentlycomprises:

• AnAustralianGovernmentcontributionof$7,143perdwellingperyearfor10yearsasarefundabletaxoffsetoracashpayment;and

• AStateorTerritoryGovernmentcontributionof$2,381perdwellingperyearfor10yearsasadirectpayment.

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The benefits of investing in an NRAS Approved Property include:

• Increasedincome

• Ownershipofanewlybuiltproperty

• Potentialinvestmentearningsfromthegrowthinthepropertyvalue

• Potentialnegativegearingbenefitsandpositivecashflowatthesametime

• TaxFreeincomeindexedfor10years

• TaxOffsetsindexedfor10years

• TaxDeductionsoninterestpayments

• TaxDeductionsonpropertydepreciation

• Sociallyresponsibleinvestinginaffordablerentalhousing

• AchoiceofpropertiesthroughoutAustraliafromonesource

• Abilitytooptoutatanytime


Who benefits from the scheme?NRASaimstoprovideaffordablerentalhousingforlowtomoderatehouseholds,includingAustralia’skeyinfrastructureworkforce(eg.teachers,nurses,policeofficersandparamedics).EligibleindividualsandfamilieswillbeabletorentNRASdwellingsat20percentbelowmarketrates,makingtheirhousingmoreaffordable.

NRASisintendedasatax-freecommercial,profitableinvestmentforparticipantswhilealsoincreasingthesupplyofaffordablehousinginAustralia.InvestorsintheSchememaybenefitfromenhancedcashreturns,certaintyoftheannualrentalincentiveandreducedvacancyratesoverthe10yearlifeofNRAS.

Who is eligible to participate in NRAS?PotentialparticipantsinNRASincludefinancialinstitutions,investors,privatedevelopers,not-for-profitorganisationsandlocalgovernmentswhomaybuild,own,financeormanageNRASdwellings.

Who can rent an NRAS dwelling?IncomelevelsforeligibleNRAStenantsaregenerousandaccommodatearangeoflowtomoderateincomeearners.Theincomelimitforasingleadultis$44,128perannum,increasingto$104,913perannumforacouplewiththreechildren.NRASalsoallowsfortenantsalaryincreasesof25percentabovetheincomelimits.

Forexampleacouple,withthreechildren,earningahouseholdincomeof$104,912peryearwouldbeeligibletorentanNRASdwelling.Withtheincomeincreaseallowanceof25percent,thisfamilycouldearnupto$131,140fortwoyearsbeforetheybecomeineligibleforthediscountedrent.

Who manages the Scheme?TheDepartmentofSustainability,Environment,Water,PopulationandCommunities(SEWPaC)isresponsiblefortheimplementationandongoingmanagementofNRAS,inconsultationwiththeAustralianTaxationOffice.

TheAustralianGovernmentisworkingcloselywithStateandTerritoryGovernments,investors,financialinstitutions,propertydevelopersandnot-for-profithousingprovidersintheongoingmanagementandimplementationofNRAS.

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The benefits of investing in NRAS

Why invest in an NRAS property?TheNationalRentalAffordabilityScheme(NRAS)isaprivateinvestmentschemetargetedatlarge-scaleinvestorsseekingimprovedreturnsontheirdirectpropertyinvestment.

NRASprovidesasubstantialannualtax-freefinancialincentiveperdwellingtoinvestorswhobuildandrentapproveddwellingsat20percentormorebelowcurrentmarketrates,tolowandmoderateincomehouseholds.

ApprovedNRASinvestorswillbeeligiblefortax-freeincentivesnotavailabletoconventional,individualresidentialpropertyinvestors,witheachapproveddwellingattractinganannualNationalRentalIncentivefor10years.

What is the annual National Rental Incentive?TheannualNationalRentalIncentiveisincometax-free,indexedannuallytotherentalcomponentoftheConsumerPriceIndex(CPI)andiscomplementedbyexistingtaxationarrangementsincludingdepreciation.TheIncentivecurrentlycomprises:

• AnAustralianGovernmentcontributionof$7,143perdwellingperyearasarefundabletaxoffsetcertificateoracashpaymentthatispaidintheJulyproceedingeachNRASyear;and

• AStateorTerritoryGovernmentcontributionof$2,381perdwellingperyearasadirectpaymentintheSeptemberproceedingeachNRASyear.

TheNRASyearrunsfromthe1stofMayuntilthe30thofAprileachyear,eachpropertyisauditedinthefirsttwoweeksofMaysothattheincentivescanbepaidwithinthefollowingmonthsofJulyandSeptember.

What are the commercial benefits of investing in an NRAS property?NRAScreatesanewresidentialpropertyassetclassforpropertyinvestorsandpresentsanewinvestmentopportunityintheAustralianmarket.Itisintendedasacommercial,profitableinvestmentforparticipantswhilealsoincreasingthesupplyofaffordablehousinginAustralia.

Theresidentialrentalmarketrepresentsagoodlong-terminvestmentwiththeopportunityforsignificantcapitalgains.InvestorsintheSchemecanexpecttobenefitfromtheannualtax-freeNRASIncentivefor10years,rentalyieldsandcapitalgain.

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How do returns on an NRAS investment dwelling compare with a conventional residential investment property?UnderNRAS,investorsreceiveataxfreeincentiveof$9,524perannum(indexedannually)for10yearsforeachapproveddwellingrentedata20percentreductiononmarketrent.

Comparedwithaconventionalresidentialinvestmentproperty,incertainmarkets,theadditionofthetax-freeIncentivecanprovideabettercashreturntoinvestorsthanchargingmarketrent.Inaddition,investorscouldapplypropertyexpensesandnon-cashdeductionsandallowancesagainstalower(80percentofmarket)assessablerentalincomewhichcouldincreasethenegativegearingbenefit.

What are the characteristics of an NRAS dwelling?ThedesignandqualityofNRASdwellingscomparefavourablywithanyotherprivatemarketnon-NRASdwelling.Typically,theyareindistinguishablefromother‘middlemarket’dwellings.Rigorousselectioncriteriaareappliedtothelocation,designandamenityofNRASdwellingstoensurequalitypropertiesarebuilttothehigheststandardsandcomplywithState,TerritoryandLocalGovernmentplanningandbuildingcodesandrequirements.

Who can rent an NRAS dwelling?NRASaimstoprovideaffordablerentalhousingforthenation’scriticalinfrastructureworkforce,suchasteachers,nurses,policeofficersandparamedics,aswellasotherlowtomoderateincomeearners.

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Can I sell my NRAS property or remove it from the Scheme and rent it at market rates?InvestorsnolongerwantingtoparticipateintheSchemecanselltheirdwellingorceasetheirparticipationpriortocompletionofthe10yearNRAStermwithoutincurringanyearlyexitpenalties:

• AdwellingcanberemovedfromtheNRASandsoldontheopenmarketwithoutobligation;or

• AdwellingcanbesoldtoanotherinvestorwhoundertakestocomplywithNRASobligations;or

• Anownercanprovideanequivalentdwellingthatcanbeofferedasasubstitutedwellingfortheremainingpartofthe10-yearperiod.

Attheendofthe10yearNRASperiod,propertiescanbesoldontheopenmarketorcontinuetobeleasedatfullmarketrental.

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Eligible dwellings and tenants

TheNationalRentalAffordabilityScheme(NRAS)isalongtermcommitmentbytheAustralianGovernmenttoinvestinaffordablerentalhousing.TheSchemeseekstoaddresstheshortageofaffordablerentalhousingbyofferingannualtax-freefinancialincentivestothebusinesssectorandcommunityorganisationstobuildandrentaffordabledwellingstolowandmoderateincomehouseholdsatbelowmarketratesforupto10years.

What is an eligible NRAS dwelling?NRASdwellingsmustmeetcertaincriteria:• Thedwellingmustbebrandnew–thatis,itmustnot

havebeenpreviouslytenantedinitscurrentcondition.• Thedwellingmustberentedataminimumof20per

centbelowmarketrent.• AnNRASdwellingmustbeselfcontained.Itmustbe

demonstratedthatatenant,ortenants,wouldbeabletoliveindependently.

Where are NRAS dwellings available to be purchased?NRASdwellingsarelocatedinspecificlocationsthathavebeenshowntohaveanundersupplyofaffordableaccommodation;typicallytheseareverysoughtafterareasthathaveverylowvacancyrates.AsarequirementoftheNRASeachofthelocationsareselectedduetotheavailabilityofamenitiesincludingpublictransport,accesstoshops,schoolsandemploymenthubs.

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National Rental Affordability SchemeHow is market rent determined for an eligible dwelling?Inyearsone,fourandsevenoftheSchemeparticipantsarerequiredtoseekawrittenvaluationfromaregisteredvaluertodeterminethemarketrentforthedwelling.

Intheotheryears,therentisincreasedinlinewiththerentalportionoftheCPIrateofthecapitalcityofthestateorterritorythatthedwellingislocatedwithin.

What is the typical length of a lease?Normallya12monthleaseisprovidedtothetenantsusingaRealEstateInstitutestandardleasethatisapplicabletothestateorterritorywherethedwellingislocated.ThesearethestandardleasesthatarenormallyutilisedforallresidentialtenancieswithinAustralia.

NRASdoesnotprovidetenantswithanyspecialrightsoverandabovetherelevantresidentialtenancylegislationintheStateorTerritorywherethedwellingislocated.

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What are the income levels for NRAS tenants?

HouseholdType EntryIncomeLevel($)

UpperIncomeLeveltoMaintain

Eligibility($)

OneAdult 44,128 55,160

TwoAdults 61,006 76,258

Couplewith1Child 75,641 94,553

Couplewith2Children 90,277 112,847

Couplewith3Children 104,913 131,141

TenantsforNRASpropertiesareselectedbyinvestorsandtheirtenancymanagers.TenancymanagersreviewtenancyapplicationsandmaintainwaitinglistsforNRAShomesbutimportantlythefinaldecisiontochooseatenantisalwaysmadebytheinvestor.

Can tenants be evicted?Yes,justasanytenantthatissubjecttothenormaltenancylegislationineachoftheStatesorTerritoriesinwhichthedwellingislocated.Allofthesamerightsandobligationsoftheapplicabletenancylawsareapplicabletoboththelandlordandthetenant.

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Tenancy Managers

Who can be a tenancy manager of an NRAS dwelling?TenancymanagersforNationalRentalAffordabilityScheme(NRAS)dwellingsmaybea:• Not-for-profitorganisation(suchasacommunity

housingprovider);• Commercialbusiness(suchasaprivaterealestateagent);

What is the tenancy manager’s role?NRAStenancymanagersmayberequiredto:• Undertakeaninitialpropertyinspectionreport;• Interviewpotentialtenantsandreceive

tenancyapplications;• Providepropertymanagementandmaintenancefunctions;• ManagetheongoingtenancyofanNRASdwelling;• Collectrentfromthetenantanddisperserentsreceipts

tothelandlord• ReportallrequireinformationtotheApprovedParticipant;• Retaintenancycompliancerecordsforatleastfiveyears.

NRASrequiresthattenancymanagementservicescomplywiththeresidentialtenancylegislationandrelevanttenancyandpropertymanagementregulationsintheStateorTerritoryinwhichthedwellingislocated.

ApprovedparticipantsshouldnotethatfailurebyatenancymanagertocomplywiththerequirementsoftheSchememayimpactonyourrighttoreceivetheNationalRentalIncentive,andmayresultinanallocationbeingrevokediftheconditionsofyourallocationarenotcompliedwith.

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ApprovedParticipantsareresponsibleforlodgingapplicationsfortheapprovalofNRASdwellingswiththeDepartmentofSustainability,Environment,Water,PopulationandCommunities(SEWPaC).AfterNRASdwellingshavebeenapprovedandsold,theApprovedParticipantisthenresponsiblefortheadministrationofthescheme,ensuringcompliance,andthereforeensuringtheinvestoriseligibletoreceivetheNRASincentive.

MotionPropertyselectsApprovedParticipantstopartnerwithindeliveringNRASinvestmentopportunitiestoclients.

MotionProperty’ApprovedParticipantshaveextensiveexperienceinbothpropertyandtenancymanagementandasignificantbackgroundinthedevelopmentoflarge-scaleresidentialdevelopmentsandinmanagingschemesthatprovideacommercialreturntoinvestorsandmeettherequirementsofGovernmentinitiatives.

Who are the Approved Participants?

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Why choose the Motion Property NRAS Approved Property Opportunity?

TheMotionPropertyNRASApprovedPropertyOpportunityallowsyouto:

• Accessadirectresidentialpropertyinvestmentinahighlysoughtafterlocation;

• Reduceyourtaxburdenthroughnegativegearing;

• Earnatleast$109,228intaxfreeincomefromgovernmentincentivesforeverypropertypurchased;

• Potentiallyenjoypositivecashflowfromdayone;

• Accessfinancestrategyadvicetohelpyoupurchasethepropertyusinglittleornoneofyourownmoney;

• Besupportedbyacohesive,experiencedteamofmortgagebrokers,conveyancers,andpropertymanagers;

• Makeasociallyresponsibleinvestmentthatbenefitsvaluablemembersofourcommunity;

• Enjoyincreasedequityasthepropertygrowsinvalue;

• Buildyourpropertyportfolio.

Remember,theMotionPropertyNRASApprovedPropertyOpportunityisstructuredtosupportyouthroughthewholeprocess.Yousimplyneedtoselectyourpropertyandourexperiencedteamwilltakecareoftherest–notjustnow,butforthelifetimeofyourinvestment.

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Illustrative Examples - NRAS Calculation

NRAS 1/1Applicant: John Citizen Property: 5 Nras Street

Purchase Price 320,000.00 Land 100,000.00

Stamp duty 2,000.00 Building 220,000.00

Total 322,000.00 Capital Allowance 0.025 2.50%

Less Deposit 66,670.00 Loan Amount 255,330.00 Interest Rate 0.072 7.20%

PAYG WITHELD

SALARY INCOME 85,000.00 85,000.00 85,000.00 85,000.00 20,904.00

Per Year Per Week Per Year Per Week

RENTAL INCOME 13,728.00 264.00 17,160.00 330.00

RENTAL EXPENSESCouncil Rates 1,000.00 19.23 1,000.00 19.23

Management Fees 1,500.00 28.85 1,500.00 28.85

Corporate Fees 500.00 9.62 500.00 9.62

NRAs compliance 785.00 15.10 - -

Rep. & Main 500.00 9.62 500.00 9.62

Depreciation - Building 5,500.00 - 5,500.00 -

Depreciation-Capital Allowance 5,500.00 - 5,500.00 -

Insurance 450.00 8.65 450.00 8.65

Interest 18,383.76 353.53 18,383.76 353.53

TOTAL RENTAL EXPENSES 34,118.76 444.59 33,333.76 429.50

Out of pocket expenses per week 180.59- *3 99.50- *3

NET RENTAL INCOME / LOSS - YEAR - 20,390.76 *4 - 16,173.76 *4

NRAS NORMAL

TOTAL INCOME BEFORE TAX (INCLUDING RENTAL OUTCOME) 64,609.24 68,826.24

TAXABLE INCOME TAX RATE NRAS NORMAL

0 - 6000 NIL - - 6001 - 37000 15% 4,649.85 4,649.85 37,001 - 80,000 30% 8,282.47 9,547.57 80,000 - 180,000 37% - -

Medicare Levy 969.14 1,032.39

TOTAL TAX PAYABLE 13,901.46 15,229.82

PAYG WITHHELD 20,904.00 20,904.00

TOTAL TAX REFUND 7,002.54 5,674.18

NRAS PAYMENTS

NRAS FEDERAL GOVERNMENT PAYMENT 7,143.00 -

NRAS STATE GOVERNMENT PAYMENT 2,381.00 *2

TOTAL NON TAXABLE NRAS PAYMENTS 9,524.00 -

TOTAL NRAS PAYMENTS AND TAX REFUND 16,526.54 5,674.18

NRAS NORMAL

Tax for the 2011 Financial year

GROSS

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Illustrative Examples - NRAS Calculation Continued

NRAS 1/1

PAYG TAX FEDERAL STATE Outcome OutcomeTAX Payable NRAS NRAS For the Per

Withheld PAYMENTS PAYMENT Year Week

WITHOUT NRASTax Refund 5,674 109 Out of pocket rental expenses 5,173.76- 99-

Out of Pocket Payment Per Week (DEFICIT) 10

WITH NRASTax Refund Before NRAS offsets 7,003 135 NRAS NON TAXABLE PAYMENTS 7,143 2,381 9,524 183 Out of pocket rental expenses 9,391- 181-

Weekly Cash Inflow SURPLUS 137

Weekly surplus due to NRAS $128

To complete this report, Please provide the following:The Applicant's Name

The Property address

Purchase Price

Cost of construction

Interest Rate

Applicant's PAYG Summaries

Projected Rental Statements

Depreciation schedule for property

1 - Note that the offsets are not assessable (will not form part of your taxable income)

2 - The State offset maybe an in kind consideration (may not be money; negotiated by the state)

3 - Depreciation is not included in this figure.

4 - Depreciation expense is included

Prepared by:

This presentation of National Rental Affordability Scheme (NRAS) is a general guide only. It doesn't take into account your or and any interested

investor's specific objectives, intentions or financial position. The figures in the illustration are estimations only and are taken from secondary

resources. No person should act on the basis of any information contained herein with out considering or/and taking professional investment advice.

The report doesn't consider all factors that would constitute your final taxation position; factors include but not limited to, other income, deductions,

offsets and surcharges. T & J Daffey & Associates accept no responsibility for any error or omission, or advice expressed herein, nor any loss

occasioned therefrom

T. J. D. ACCOUNTING SERVICES PTY LTD

T/A T & J DAFFEY & ASSOCIATESCertified Practising Accountants

For more information please contact: Sam Misho or Dominic Murphey 319 Keilor Road Essendon VIC 3040 Tel: 03 9379 4040 Fax: 03 9379 3139 Email: [email protected]

BENEFIT ANALYSIS (WITH & WITHOUT NRAS)

This document has been prepared for the exclusive use of Motion Property and their referral networks and agents.

TogetstartedwithanNRASpropertypleasecontactyourlocalagent:

Documents

National Rental Affordability Scheme0104.nccdn.net/1_5/121/0b4/2f2/NRAS-Brochure.pdf · The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian