NRAs

Discussion in 'What to buy' started by hash_investor, 10th Sep, 2020.

Join Australia's most dynamic and respected property investment community
Tags:
  1. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    Anyone holds NRAs in QLD? Is there anything that I need to know? I am looking at a property which will come off NRAs in a few years time but looks like it does provide good yields on its own too. I have got independent advice on rental potential in the area and it sounds good.

    Is there anything I need to know about NRAs?
     
  2. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,125
    Location:
    The beautiful Hills District, Sydney Australia
    who is the NRAS provider? what are their fees?
    who is the tenancy manager? what are their fees?
    what is the end date if the NRAS incentive?
     
  3. gach2

    gach2 Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    1,895
    Location:
    sydney
    Have 1
    Everything is per normal - easier to find tenants with 20% discount comparative open market (100% market rent)
    Just the pm fees are likely 12% v 8.8
     
  4. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    It seems like the property is managed by NAHC with a 10% fee. No other manager.
     
  5. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,125
    Location:
    The beautiful Hills District, Sydney Australia
    NAHC typically require that you accept a 25.1% discount to the rent. It is not required under the NRAS act - they do this so that they protect their "charity" status and pay no tax....

    You should also seek very clear commitments that all fees to be paid to transfer the NRAS from current owner to you will be borne by the current owner. I may be wrong but I think NAHC charge @ $1000 + GST for that. $200-300 processing fee is one thing. Thats a reasonable fee to process a change of ownership. $1000 for what is essentially a generic PDF with a name change is another thing entirely I feel.
    Get a complete list of their fees as well, just so you know what you are going to end up with in your pocket ..... For a "charity" they definitely take lots of ticket clips along the way . None of it is illegal or even immoral , but I find they take the **** with fees. Less rent. Higher fees. They are by far my least preferred NRAS model because of that.

    On the other hand, if that's the property you want , and they are providing the NRAS credit for it, then those are the fees you have to accept. It's no different to buying into a property with X amount of strata or X amount of council rates. Just make sure you know what the costs are and what you are going to receive . if the deal stacks up for you, go ahead....
     
  6. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    How are the NRAs incentives paid? Are they paid in the form of tax deduction? The agent has sent me a paper about these details which claims 11K from the government paid as 8K in federal tax deductions and 3K from state govt. My question is if it is 8K tax deductions that its not 8K cash. It is the marginal tax rate from 8K.
     
  7. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,125
    Location:
    The beautiful Hills District, Sydney Australia
  8. gach2

    gach2 Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    1,895
    Location:
    sydney
    That 8k is cash - even if you don't pay any taxes - its a refundable tax offset not a tax deduction. You just need to include it in your tax return before you get the cash
     
  9. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    ok. so when I lodge my TR I will get back 8K in cash and money from state govt. on top of it?
     
  10. gach2

    gach2 Well-Known Member

    Joined:
    29th Jun, 2015
    Posts:
    1,895
    Location:
    sydney
    around that mark but check your providers fees as usually they take a cut and as euro73 mentioned NAHC seem to be a bit higher than the rest
     
  11. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,125
    Location:
    The beautiful Hills District, Sydney Australia
    NRAS is paid in TWO parts.

    The Refundable Tax Offset /Commonwealth payment is worth 75% of the annual NRAS credit amount. It is claimed via your tax return. If the Credit was $11,000 for example, and you'd held the property for a full NRAS year ( May 1-April 30 ) and it was compliant, you'd be claiming $8250. ( 75% of $11,000 ) You need an RTO certificate to make the claim. Those are issued to you by the AP around the end of the financial year. The NRAS year runs 2 months ahead of the financial year deliberately. This allows for compliance processing to be completed before the end of the financial year , so that you can claim your money

    The NANE /state payment is worth 25% of the annual NRAS credit amount . It is paid directly to your bank account by the NRAS Approved Participant (AP) after they are paid by the state Govt. The State is paid approximately 2 months after the RTO's are issued by the Commonwealth.
    Using the same hypothetical as above, after the NRAS RTO certificates are issued the NRAS AP would receive a payment from the relevant state Government worth $2750. Then the AP pays you, minus their clip of the ticket.

    By clip of the ticket, I mean fees; all Approved Participants /consortiums take some of the NRAS amount as a fee for processing the compliance paperwork etc.... Models such as AAHSL( previously Questus ) or AMC take the money as a success fee; meaning they take it from the state payment. Again, using the example above , if AAHSL takes 5% + GST, they take 5.5% of 11K . ie $605. And they take it from the $2750 state payment . So you would receive $$2145 direct to your nominated account. ie $2750 minus $550. AMC takes 8% + GST, so you'd receive $1782 of the $2750 . They would retain $968. A very small number of providers - including NAHC - take the fee monthly, so they get paid whether you are compliant or not. And their fee is higher than most AP's .....

    Like I said... least preferred model. But they own the incentive /allocation attached to the property you are interested in, so they can charge what they want for the use of their incentive/allocation.

    So if they do things efficiently and you do things efficiently...it should flow like this - give or take.

    Receive your RTO certificate from your AP around the end of the financial year
    Lodge your return . Get your return processed into your account @ 2 weeks later
    Get your state payment into your account @ late August.
    Repeat until your NRAS period expires.

    FYI, the 2020-21 NRAS looks like this.
    Australian Government Contribution $8,452.94
    State/Territory Contribution $2,817.65
    Total $11,270.59

    Based on those numbers, if you settled on the property today, you would be entitled to a proportional amount from today until April 30,2021 in next years tax return. 228 days to be exact. The NRAS is worth $30.88 per day ( $11,270.59 /365 days) , so you'd be entitled to $7,040.26 in this hypothetical. ( 14/09/20 - 30/04/21) which equates to
    $5280.19 from the tax man
    $1760.07 from the state - minus the AP's clip of X
    The year after that, you'd get the entire amount to yourself- assuming the NRAS has another full year to run...

    The people selling the property should have explained all of this. I'll send you an invoice later :) They owe me a commission too !!!
     
    Last edited: 14th Sep, 2020
    New Town, LibGS and hash_investor like this.
  12. inpersuitofhappiness

    inpersuitofhappiness Well-Known Member

    Joined:
    3rd Oct, 2021
    Posts:
    155
    Location:
    Perth
    Would it still make sense if NRAS incentive ends in about 3 yrs time?
    11k p.a incentive
    Gross yield on present rent - 5.1% without including incentive.
    Smallish block 200 m2 - 6 yrs old construction.
     
  13. inpersuitofhappiness

    inpersuitofhappiness Well-Known Member

    Joined:
    3rd Oct, 2021
    Posts:
    155
    Location:
    Perth
    Would it still make sense if NRAS incentive ends in about 3 yrs time?
    11k p.a incentive
    Gross yield on present rent - 5.1% without including incentive.
    Smallish block 200 m2 - 6 yrs old construction.