Hi all
We have gone off the idea of investment unit up the coast and are now looking at buying a new house for investment property. Just wondering if anyone out there has had anything to do with NRAS and if its a better option than simply an investment property of our choice.
ThanksAll I can say is, make sure you pay enough tax to offset the NRAS tax offset you get.
The way I understand it (and someone please correct me if I am wrong) the majority of the money (currently $7,486) is a tax offset, which means you only get it back if you pay tax, and if you are already claiming enough back on tax you may not get the full benefit. Also you state "we" if you were to purchase the property 50/50 with a partner and one of you is not earning an income (or at least over the new $18k threshold), there goes half of that tax offset…
Other than that, it looks like a great scheme, and I am considering it myself, as it allows select vetted people live there (not "houso's" as some people think), and can actually turn your property into a cash flow positive property from day one.
As the amount you get is not based on the rental, finding something with a lower rental (ie not in the middle of a major city) would be more beneficial to the savings you get.
My only suggestion would be make sure it is in a good area, ie: the mines are great and will last for years to come, but what if they stop mining where you buy, or the economy does go to crap and the mines stop… will you be able to rent the property out to someone else? Make sure it is in a good location people will want to live at any time, and after NRAS is gone… invest for the long term not for the short term profits.
The amount of cash incentive NRAS givesis currently around $9800, not $7486. It is indexed every year.
The lower the price you pay for the NRAS property the better as it is a set amount whatever the house is worth, so $9800 is proportionately better for a $300k property than a $500k one.
Pros of my NRAS property- good tenant who pays rent on time, cash incentive, in a good area where demand is high, brand new so good depreciation.
Cons- I probably won't buy off the plan again as I was paying out for the land and construction loans out of my own pocket while being constructed. According to the NRAS rules I can sell it at any time, but the fine print says I have to give 6 months notice. The fees for the rental management are high – 10% of market rent (not nras rent). As you receive only 75% of market rent, you need to cover a fair whack of the mortgage payments yourself as you don't get the nras incentive back until after tax return done. I needed to organise a tax variation to cope with that.wendywoo wrote:The amount of cash incentive NRAS gives is currently around $9800, not $7486.
Not to be rude wendywoo but this is incorrect and was the exact thing I was trying to point out to would be investors, as a statement like that can cause people great financial hardship.
The $7486 is correct and is a federal government Tax offset NOT a cash incentive as you say it is (as per my first post)
There is also a $2495 cash incentive from the relevant state government, which is as it says cash.This is all listed in the following link about halfway down the page under the subheading "Background":
http://www.fahcsia.gov.au/sa/housing/progserv/nras/Pages/about_nras.aspx
The fact that it (or at least the majority) is a tax offset and not a cash bonus is the main thing people need to be aware of, that you need to pay enough tax in the first place to get it back, otherwise you will simply be out of pocket.
not to be rude aussieguy, but you didn't make this distinction obvious in your first post. This is why I hate forums, somehow everytime a newcomer tries to post, other people shoot their comments down. Please be more friendly
I did state in my first post the majority was a tax offset, and that is all I was trying to point out, I did not intend to be rude so I apologise if it came across that way, it just that the distinction between cash and tax offset is often misunderstood with NRAS.
This can be quite significant to individual financial situations, and I just want to make anyone who is thinking about it aware of this, so they can then make the correct decision for their situation.
Other than that it is good to hear from someone who has used the scheme and has feedback on it.
Hi All,
Just wanted to clear up that the NRAS tax offset is a refundable tax offset – that means that if you pay less than $7,143 in tax, you actually get money back from the government rather than lose out altogether. So for example, if would normally pay $2,000 in tax without purchasing an NRAS property, you would get $5,143 back from the ATO at tax time. You can read more about it here: http://onyx.net.au/nras/nras-investment-returns/ or straight from the horse’s mouth here: http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/00179876.htm&page=4&H4
Cheers,
Melanie
newbiebeginner wrote:if anyone out there has had anything to do with NRAS and if its a better option than simply an investment property of our choice.Hi Newbie,
Whatever you end up doing make sure the fundamentals of the property are good and are consistent with your investment goals.
NRAS properties are often sold on the tax benefits and you need to look beyond these to make sure the deal stacks up – yes the taxation benefits are quantifiable but keep your eyes wide open.
Developers, NRAS marketers etc are all making good profits on these properties. If you do go down this pathway make sure you get what you want.
Thank you Melanie for your insight into this, as I had not been able to find anything like that previously. It was one of the reasons I was hesitant about NRAS as my wife will most likely not be working for some time in the near future when we start having children.
Knowing this is great as it can help me make a more informed decision, and I can gladly say I am more than happy to be wrong with my previous comment (above).
Hi – Not sure if this has been made clear.
NRAS incentive is given to any and all investors in full regardless of income earning or whether you are working,
Part of it is a federal government payment and part of it is a stategovernment payment. The portion given as a tax offset is given to you via tax return if you have that much to claim – however, it is DEFINITELY given to you regardless. and is given as a payment if you are not working or not earning enough. this is why it is a tax offset or payment.
The full amount is absolutely given to everyone.
I hope that clears that up for you.
the NRAS investment is a good one to consider. It brings in more money than a average investment even though there are fees involved.
if you plan an NRAS investment well you will end up with a positive cashflow new property.
the real considerations are:
- your shortfall in the year prior to collecting the incentives (which can be assisted by way of line of credit if finance allows or even better a tax variation which is done by your accountant)
- costs of interest if you are buying a house and land prior to rental coming in
- correct choice of NRAS property
I hope that makes it clear that the tax offset/payment is for EVERYONE
Make sure you do your FULL research on how the NRAS may and/or may not benefit you. I know many Agents who have moved away from the scheme for different reasons. There are also numerous who fully understand the process and are working the model very well.
The answer to that question will probably depend on your investment goals and strategy. The main issue with NRAS that I believe is most critical is how much of your equity or cash you will need to use to get into the investment – what lvr is on offer (of course you would not even be looking at the location and property type unless the fundamentals checked out so that part goes without saying) followed by finding a property that is going to value up. Valuation is the most common reason nras finance deals fall over. This can be overcome with the right lenders.
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
hi newbiebeginner,
i recently wrote a rather lengthy post on NRAS and the positives and negatives surrounding this kind of investment. you may find it helpful – http://mypropertyjourney.com/2012/05/20/what-you-need-to-know-about-nras/
The incentive sits at $9981.
75% is paid via the Commonwealth, using a refundable Tax offset.
http://www.ato.gov.au/nonprofit/content.aspx?menuid=0&doc=/content/00179876.htm&page=4&H4
25% is paid via the states- http://www.ato.gov.au/nonprofit/content.aspx?menuid=0&doc=/content/00179876.htm&page=22&H22
You're talking about the QAHC model- which is unfortunately the most expensive in the market, and requires a 25% rental discount. All other NRAS models have lower fees and require only a 20% rental discount. I dont know why so many people choose to go with NRAS properties approved under the QAHC model, when there are so many other options…..
I've said over and over again… try to stay out of SE Qld and make sure you talk to people who know what they're talking about with NRAS
INCORRECT! Its a refundable Tax Offset- you get it whether you have a taxable income or not.
http://www.ato.gov.au/nonprofit/content.aspx?menuid=0&doc=/content/00179876.htm&page=4&H4
My only comment would be to remember that the NRAS tax offset is a refundable tax offset and therefore you need to have relevant income or a tax liability to offset it against. This type of investment can have its place in your portfolio, however, you simply can't continue to build your portfolio on pure NRAS properties because at some stage you have nothing left to offset the offset against no matter how cash flow positive they are.
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