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Government scheme helps property investors

Government scheme helps property investors

July 08, 2011

Would the promise of $100,000 paid to you in 10 tax-free annual installments help lure you into investing in property? If the answer is yes, then maybe the government’s National Rental Affordability Scheme (NRAS) is the right home finance service for you.

Unlike it’s more glamorous cousin, the First Home Owners Grant, the NRAS has until recently languished in the shadows, thanks to a lack of adequate promotion.

Now, however, with rental accommodation at an all time low nationwide, the program is gradually making its way into the limelight. And it offers good news for property investors who stand to receive a cool $100,000 in tax-free government incentives for investing.

So what’s the catch? To participate, you must buy a property from an approved participant and agree to rent it out to a low- to moderate-income household for a minimum of 10 years at 20 percent below the market rate. In return, the government pays you $9524 per year for 10 years, indexed each year against the rental Consumer Price Index (CPI).

Seventy-five percent, or $7143, of that sum is paid as a refundable tax offset from the federal government that is claimed at tax time, and the state government pays the remaining $2381 into a designated bank account.

NRAS was introduced in 2008 in a bid to address the housing shortage and increase the supply of affordable rental dwellings nationwide. NRAS properties are available in all states. They must be new, but can be purchased off the plan, as house and land packages or built according a to certain standard (as opposed to a price point) and you must also adequately maintain your property.

As with any investment, you need to do your research before you jump in, as each approved NRAS organisation will have varying models. Usually they fall into three variations: head lease, non-entity joint venture and managed investment scheme.

For more information, your best option is to speak to a financial advisor as the information available online regarding NRAS is patchy and inconsistent.

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