NRAS Loans - National Rental Affordability Scheme
The National Rental Affordability Scheme
(NRAS) is a Federal & State Government
backed incentive scheme created with a view to:
1. Create an
opportunity for investors with
generous tax incentives;
2. Increase the supply of new affordable rental
3. Reduce rental costs for low and moderate
4. Encourage large-scale investment
innovative delivery of affordable housing
growth areas with good infrastructure.
The NRAS incentive is a tax-free payment from the
Federal and State Governments, currently totalling $10,350 per year (indexed), per property for ten years
amounting to more than $100,000 over ten years. In return for this payment, the property must be rented
at least 20% below the prevailing market rate to an eligible tenant.
Negative gearing would still apply but unlikely to be applicable since the annual
tax-free payment you receive, usually means the property is cash flow positive. This is not usually the
case with property investment, and is a fantastic outcome for the investor having a positively geared
property investment, as well as backing a scheme to provide more affordable housing.
The properties are for low to moderate wage earners who want access to more affordable housing
to rent and the properties are not housing commission or social homes.
The NRAS scheme is only applicable for homes in approved NRAS property developments . And the
property must be newly built within the NRAS to be eligible for the scheme.
Youare not locked in and the NRAS is flexible. The property can be removed from the scheme at any
time, or sold to another investor. The government does not have any ownership of your property – it is
completely controlled by you, the investor. If the
property was removed from the scheme, of course your Government payments would cease.
Self Managed Super Fund (SMSF)
Until recently, Self managed Super Funds (SMSF) could not take out loans against property in
the SMSF name.
That has all changed now and SMSF's can raise a loan to purchase real estate
There are some unique requirements in order for a SMSF to raise a loan, so you
may need additional advice from your Accountant or Lawyer or Financial
While an SMSF loan is secured against the property you are purchasing, the transaction needs
to be structured so that the other assets of the super fund are protected. This is done by the use of a Trustee
that is not related at all to the SMSF, so a Trust needs to be established.
The main differences between a regular property loan and an SMSF Loan
- The SMSF is the beneficial owner until the loan is fully repaid;
- The Trustee actually has the responsibility and control of the running of
- Commercial or residential property acceptable, but no construction or vacant land currently
(unless it produces an income);
- Lending limits vary, but as a rule you could get funding of up to 80% of property value for
residential (30 year loan) and 70% for commercial property (20 year loans);
- Servicability of the loan is calculated by super contributions and expected rental return -
not your personal financials;
- You could be required to be a Guarantor;
- Either interest only or principle & interest repayments can be
It is best to seek independent financial advice before entering into SMSF loans, or creating
your own Self Managed Superannuation Fund (SMSF) as it may not be the best option for
Finance Allsorts can assist
you with your NRAS or SMSF loan.
Note: Government incentives are subject to review and