National Rental Affordability Scheme - Frequently asked questions

About the Scheme
Investment Benefits
Tenancy management
Approved dwellings and tenant eligibility
NRAS incentives
NRAS Round 5 – Frequently Asked Questions
NRAS Questions and Answers – Outcome of applications for incentives through Round 5

About the Scheme

What is the National Rental Affordability Scheme?

The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian Government to investors prepared to build affordable rental housing.

NRAS seeks to address the shortage of affordable rental housing by offering financial incentives to the persons or entities  to build and rent dwellings to low and moderate income households at below-market rates for 10 years. It aims to:

  • increase the supply of new affordable rental housing
  • reduce rental costs for low to moderate income households
  • encourage large-scale investment and innovative management of affordable housing.

How does NRAS work?

NRAS provides a substantial annual incentive, to persons or entities to build and rent new dwellings to low and moderate income households at a rate that is a least 20 per cent below the market value rent. The incentive is available to approved participants who successfully apply through an open call for applications. There have been four calls for applications so far.

Who benefits from the scheme?

NRAS aims to increase the supply of affordable rental housing for low to moderate households across Australia. Eligible individuals and families are able to rent NRAS dwellings at a rate that is at least 20 per cent below market value rent.

Who can participate in NRAS?

Potential participants in NRAS include financial institutions, medium to large-scale investors, private developers, not-for-profit organisations and community housing providers who may build, own, finance or manage NRAS dwellings.

Participants apply for allocations of incentives under an open call for applications. There are many approved participants across Australia as a result of four previous calls for applications.

Who can rent an NRAS dwelling?

A condition that must continue to be fulfilled for an approved participant to receive the incentive is that dwellings must be rented to eligible tenants.

Income limits for eligible tenants are based on the gross income of each household and accommodate a range of low to moderate income earners.

Who manages the scheme?

The Department of Social Services (DSS) (previously known as the Department of Families, Housing, Community Services and Indigenous Affairs) is responsible for the ongoing management of NRAS, in consultation with the Australian Taxation Office and the States and Territories.

Investment Benefits

Why become an NRAS approved participant?

NRAS provides a substantial annual incentive per dwelling to approved participants who build and rent approved dwellings at a rate that is a least 20 per cent below the market value rent, to low and moderate income households.

What is the annual NRAS incentive?  

The NRAS incentive is an annual amount, indexed annually provided to approved participants for each approved dwelling which complies with the conditions of the allocation of incentive for the dwelling. The incentive comprises:

  • An Australian Government contribution per dwelling per year for up to 10 years as either a tax offset or cash (for endorsed charitable organisations who have not made an election to receive a tax offset).
  • State and Territory Governments may offer approved participants a contribution per dwelling per year as direct payment or payment in-kind.

What are the commercial benefits of investing in NRAS?

NRAS is intended as a commercial investment option for approved participants while also increasing the supply of affordable rental housing in Australia.

Investors in the scheme may benefit from the annual incentive for up to 10 years as well as through rental yields and potential capital gains.

Where the investor is not the approved participant in the Scheme, investors will need to have contractual arrangements in place for the approved participant to pass on any Australian Government incentives. These arrangements are outside the scope of the Australian Government.

Can small-scale or private investors participate in the Scheme?

As NRAS aims to encourage medium to large-scale investment in affordable housing (generally more than 100 dwellings), it is not generally available to small-scale, private, individual investors in the rental property market who may own or build a small number of properties. Individual investors could become involved by investing in entities that participate directly in the Scheme, for example, through a superannuation fund or property trust, through a consortium arrangement, or may, under some circumstances, purchase a dwelling which is subject to an allocation of an NRAS incentive.

What are the characteristics of an NRAS dwelling?

The design and quality of NRAS dwellings compare favourably with any other private market dwellings. Typically, they are likely to be indistinguishable from other 'middle-market' dwellings.

Selection criteria are applied when assessing applications for allocations under the Scheme. These criteria relate to the proposed location, design and amenity of proposed dwellings. A condition that needs to be satisfied for an approved participant to receive an incentive under the Scheme is that all dwellings must also comply with State, Territory and local Government planning and building codes and requirements.

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

Yes. Subject to any other contractual obligations, approved participants no longer wanting to participate in the scheme can sell their dwelling or cease their participation prior to completion of the 10 year NRAS term without incurring any Government penalties. However, no incentive will be payable once the conditions of allocation for the dwelling cease to be met.

How can I purchase an NRAS property?

The Australian Government is not directly involved in buying and selling individual properties. Potential purchasers may wish to contact the NRAS approved participants in the States or Territories where they wish to purchase dwellings.

Can I buy a house and then get it included in NRAS?

No. Only NRAS approved participants can have dwellings approved under the Scheme. These participants are selected through an application process and have approved dwellings in approved locations.

I recently purchased an NRAS property. How can I get my tax offset certificate so I can submit my tax return?

Any arrangements between approved NRAS approved participants and individual purchasers of NRAS dwellings are solely between the parties involved and do not involve the Australian Government. Purchasers should put their own arrangements in place with the relevant approved participant in order to ensure that they receive the tax offset certificate. The Australian Government only provides tax offset certificates directly to NRAS approved participants, and only if they comply with the requirements of the Scheme.

State and Territory Governments pay their annual contribution as a direct payment or payment in-kind to approved participants.

What happens if I sell my NRAS dwelling?

The NRAS incentive is only payable when approved participants meet the conditions of allocation under the Scheme. If a dwelling is sold, it may no longer be eligible to receive the incentive if it ceases to meet the conditions of allocation. No penalties are imposed by the Australian Government beyond this.

I bought an NRAS dwelling but have changed my mind and dont want to participate in the Scheme. What can I do?

Subject to any other contractual obligations, approved participants no longer wanting to participate in the scheme can sell their dwelling or cease their participation prior to completion of the 10 year NRAS term without incurring any Government penalties. The Australian Government has a direct relationship with NRAS approved participants only. Any arrangements between approved participants and individual purchasers or investors is beyond the scope of the Australian Government’s responsibilities and powers under the Scheme. Purchasers are urged to seek independent financial, legal and taxation advice before purchasing NRAS properties.

Tenancy management

Who can be a tenancy manager of an NRAS dwelling?

Tenancy managers for NRAS dwellings may include:

  • not-for-profit organisations (such as a community housing provider)
  • commercial businesses (such as a private real estate agent)
  • local government bodies
  • State or Territory governments on a fee-for-service basis.

Approved participants may contract a service provider to manage dwellings on their behalf or the tenancy manager could form part of the consortium which makes the NRAS application.

What is the tenancy manager's role?

NRAS tenancy managers may perform services to help an approved participant satisfy conditions of allocation such as:

  • assessing tenant eligibility and retaining tenant records
  • managing determination of market rents and the below-market rents charged to tenants of approved NRAS dwellings
  • providing property management and maintenance functions
  • managing the ongoing tenancy of an NRAS dwelling
  • reporting compliance with tenant eligibility, rent levels and other regulatory requirements under the Scheme to approved participants
  • retaining tenancy compliance records for at least five years.

A condition of allocation is that approved participants must ensure that each approved rental dwelling, and the management of it, complies at all times with the landlord, tenancy, building, health and safety laws of the State or Territory and local government area in which the dwelling is located. Failure to comply with this condition of allocation will lead to an incentive not being payable.

In some jurisdictions, tenancy managers may need to hold a real-estate license. The relevant State or Territory government housing agency can provide details of any local requirements.

Can an approved participant manage the NRAS property themselves?

Yes. Approved participants may undertake the tenancy manager role.

Who is responsible for checking tenants' incomes?

The approved participant is responsible for ensuring that tenants’ household incomes remain within the household income limits. The approved participant may engage a tenancy manager to perform this function, however, responsibility remains with the approved participant as failure to meet this condition can result in an incentive not being payable to the approved participant.

How should tenants' incomes be checked?

It is a condition of allocation that rental dwellings covered by the Scheme are only rented to a tenant or tenants who are eligible tenants, as prescribed in the NRAS Regulations. Eligible tenants are defined according to household income thresholds which are subject to annual indexation.

Approved participants are obliged to lodge annual statements of compliance including a statement that, at all times during an NRAS year, the household income of tenants in a dwelling was within the thresholds (or details of any way in which this requirement was not met).

Approved participants (or tenancy managers on their behalf) should take reasonable steps to accurately determine the household income of NRAS tenants. The collection and holding of this information must be done in accordance with the requirements of the Privacy Act 1988. Documents that may assist in determining household income include:

  • copies of payslips
  • notices of assessment for annual income tax returns
  • letters from employers
  • statements from superannuation funds
  • statements from Centrelink
  • statements of dividends or rents paid.

Apart from reporting household income information in statements of compliance, an approved participant must maintain all records in relation to an allocation or payment of an incentive, including records relevant to household incomes of tenants, for 5 years.

How are tenants selected for NRAS dwellings?

Assessment and selection of tenants is at the discretion of the approved participant. In Queensland tenants must also be registered with the Queensland Government's One Social Housing Register.

Approved dwellings and tenant eligibility

What are the requirements of an NRAS approved dwelling?

NRAS dwellings must meet certain criteria:

But does not include a caravan, houseboat or other kind of mobile dwelling.

  • The dwelling must be either brand new – that is, it must not have been previously lived in as a residence, or, if it was previously uninhabitable and has been made habitable for the purposes of NRAS, it must not have been lived in as a residence since it was made fit for living in.
  • The dwelling must be rented at a rate that is at least 20 per cent below the market value rent.
  • Where a dwelling has not been lived in as a residence before but has been converted to create additional residences, then a part of the dwelling or building that is capable of being lived in as a separate residence must not have been lived in as a separate residence before the first day of the incentive period.
  • A rental dwelling under the Scheme is a dwelling for which rent is payable and includes (but is not limited to):
    • a part of a dwelling or building that is capable of being lived in as a separate residence
    • a unit that is a dwelling but does not include a caravan, houseboat or other kind of mobile dwelling
  • The tenants of NRAS dwellings must meet the income requirements prescribed by the Regulations.

How is market value rent determined for an NRAS dwelling?

In years one, four and seven of the dwelling’s incentive period, NRAS approved participants are required to seek a written valuation from an independent registered valuer to determine the market rent for the dwelling.

When a new lease is entered into for a dwelling, or at 12 monthly intervals for existing leases, approved participants may review the rent charged for thee dwelling  based on information about the location, type and amenity of the approved dwelling and supported by publicly available data about comparative rental rates, and may then increase the rent, as long as the increase does not exceed the movement of the NRAS market index, which is determined by the Rents component of the Housing Group of the Consumer Price Index.

However, the rent charged must at all times remain at least 20 per cent below market value rent, as determined by the most recent written valuation obtained from an independent registered valuer.

What is the typical length of a lease?

Approved participants are not required to provide longer term leases or other rights for tenants beyond those which are required by relevant State and Territory landlord and tenant legislation. NRAS does not provide tenants with any special rights in relation to the length of leases over and above the relevant residential tenancy legislation in the State or Territory where the dwelling is located.

What are the income limits for NRAS tenants?

Current income limits are:

The gross income limits for households to rent NRAS dwellings are specified in the NRAS Regulations.  Income levels are assessed against gross income limits according to the household composition.  For NRAS purposes, a household is considered to be all persons ordinarily residing in the home. All persons who ordinarily reside in a NRAS home should have their income included as a member of the household in order to determine gross household income.

A household’s gross income for the 12 months ending on the day before tenancy of an NRAS dwelling commences, must be equal to or less than the relevant income limit for the household’s composition. Household income may then increase above the income limit. However, existing tenants will cease to be eligible if their household income exceeds the applicable household income limit by 25 per cent or more in two consecutive years.

Each year, household income limits are indexed according to percentage changes of the All Groups component of the Consumer Price Index so that the limits effectively maintain the same target group of tenants over the life of the Scheme.

Failure to lease a NRAS dwelling to eligible tenants may result in an incentive not being payable to an approved participant. This also needs to be reported in an approved participant’s statement of compliance.

How can I find an NRAS dwelling to rent?

Potential tenants should contact one of the approved participants or their tenancy managers for available properties. NRAS properties for rent may also be specified in real estate web pages. In Queensland, tenants must register with the Queensland Government’s One Social Housing Register

Do the income limits for tenants have exceptions?

No. In order to be eligible to rent an NRAS dwelling, a tenant’s gross household income must not exceed the applicable household income limit. For existing tenants, gross household income may exceed the applicable income limit. However, if the limit is exceeded by more than 25 per cent in two consecutive years, a tenant will cease to be an eligible tenant.

Who are the tenancy managers in each state?

There are a number of tenancy managers in each State and Territory.

What protections are in place for tenants?

NRAS does not provide tenants with any special rights over and above the relevant residential tenancy legislation in the State or Territory where the dwelling is located. Tenants should be offered a standard lease for the property the same as for any other rental.

NRAS is simply a Scheme which allows for incentives to be paid to approved participants who meet conditions. Tenants have no specific rights or protections under the NRAS legislation. Failure of an approved participant to meet their conditions of allocation, including as they relate to tenants, results in an incentive not being payable for the approved  participant.

NRAS incentives

The NRAS incentive is an annual amount, indexed annually according to the movement in the Rents component of the Housing Group of the Consumer Price Index, and paid to approved participants for each approved dwelling which complies with the requirements of the Scheme. The incentive comprises:

  • An Australian Government contribution per dwelling per year for up to 10 years as either a tax offset or cash (for endorsed charitable organisations who have not made an election to receive a tax offset).
  • State and Territory governments may offer approved participant a contribution per dwelling per year as direct payment or as payment in kind.

How much is the NRAS incentive?

What is a tax offset?

Under the Scheme, approved participants who are not endorsed charitable institutions are issued a tax offset certificate. Some endorsed charitable institutions can also elect to receive their incentive in this way.

For more information on NRAS related tax issues visit the Australian Taxation Office website.

How is the NRAS incentive calculated each year?

It is calculated using the rents component of the Housing Group of the CPI for the year, December quarter to December quarter as at 1 March of the immediately preceding NRAS year, using the summary table weighted rate of eight capital cities housing component, as published in the Australian Bureau of Statistics publication Cat.no. 6401-0 – CPI, Australia, CPI: Group, Sub-group and Expenditure Class, rounded to the nearest single decimal point.

When and how are the incentives paid?

If the conditions of the allocation of an incentive for a dwelling have been met, the NRAS approved participant is issued with a tax offset certificate or payment (for charitable institutions) in July each year. The State/Territory component of the incentive is generally paid in September each year, and NRAS participants should contact the relevant State/Territory government for payment details.

Can I get my state component of the NRAS incentive paid as a tax offset?

No. The State/Territory component of the incentive is generally paid directly or as payment in-kind. NRAS participants should contact the relevant State or Territory to discuss this payment. For more detailed taxation advice, contact the Australian Tax Office directly.

When is tax payable?

If private individual investors receive the Australian Government component of the incentive in cash from an approved participant, this may be assessed as taxable income

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