Real NRAS Numbers

I was just reviewing my very late 15/16 tax return and here are my cash flows. I've currently got 5 NRAS properties, 2 are relatively new. But the other 3 have full 12 months of government incentives.

Orange: $9,400, equity approx $50k.
Orange: $10,100, equity approx $50k.
Croydon: $6,800, equity approx $50k
Footscray: $8,600 (only 33 weeks), equity approx $80k.

These figures are AFTER tax.

Fortunately I have no non deductible debt, so all the surpluses go into debt reduction as offsets. Add to that some some modest CG (I expect the regionals to be 2%ish), I'll be in a pretty good place in 10 years.

Overall, its working for me very nicely indeed.

 

Very nice
Footscray? What is the product????

thanks
MTR

 

Did you apportion the interest?

 

I've just spent $30k and bought 3 x allocations for a 1 bedder project in Clarkson. They have 9.5yrs left to run. I'm looking forward to increasing my NRAS.

 

I wanted to buy NRAS because I'm a cashflow addict, but I couldn't justify the price of products I looked at vs what else I could buy in the area for the same money. Sounds like it worked for you

 

Footscray is a 2 BR apartment. Orange is 2 x 1 BR units. Croydon is a 1 BR ground flood apartment with a courtyard, nice little property.

I'm a very hands off investor, I don't have the time or skill to do the whole reno, value add thing, these are ideal for me.

 

Can you please explain what you mean, I don't follow.

 

16/17 will be better

I was audited for the 3rd year in a row this year. They always audit me - the dollar size of my NRAS refundable tax offsets must trigger a red flag ... and for the 3rd year in a row they paid me exactly what I said they owed me.... actually, they paid me $600 odd bucks extra this year .... I didnt bother asking why .... if the ATO wants to give me a little gift I will surely smile and take it

I love reading posts like yours @LibGS ... because it only proves what I have been saying all along - if employed correctly and well, NRAS offers fantastic returns. Your returns on equity are over 20% on some properties.... where else can you get 20% back on 50K invested? And its tax free !

#thenumbersdonotlie

 

Never too late.....

 

You can't claim all the interest on a low. Used to buy a NRAS property.

 

Everything is strictly separated. I'm quite careful not to contaminate/misuse loans and interest.

 

I am not talking about contamination but the fact that some of the NRAS income is not addressable. This means the whole interest incurred on a low used to acquire a NRAS property will not be deductible.

I have written a tax tip on this.

 

Can you ask for the NANE to be declared as assesable income?

 

No.

And why would you?

 

Back of envelope (spreadsheet actually) calcs show that if the NANE was done incorrectly (by my accountants grrrr) then its a dent in the CF because I'd lose 5k of deductions. But if it was taxed, I wouldn't lose 5k of deductions and I'd only be down 1k overall. But my calcs could be wrong, most likely wrong.

Anyway, this is all too tricky, I pay other people to deal with this, I've fired off an email to my accountant and I'll see what happens.

 

If he hasn't alerted you then he is probably not aware of the issues. But let us know what he says.

 

Ok....

I finally have some answers. It turns out my accountants did factor it in, but didn't communicate it well.

1. I got my 1st tax return and the depreciation didn't match my schedule. It was out by 21%. I didn't notice that all the expenses were out by 21%, if I had then I would have had a clearer picture. In fact, the 21% is the apportioned percentage due to the NANE, but this was not mentioned anywhere.
2. I emailed them and pointed out that the depreciation was out 21%. I was sent a new tax return with corrected dep figures but the expenses were still out which I still didn't notice.
3. I did the calcs and postsed on here. Discussion followed and I wrote to my accountants and asked about the NANE.
4. Response back was DOH, the first tax return was in fact correct with the apportionment done.

Now.... the bad news.

After recalculating everything with the original correct figures, it doesn't look so good.

Orange: $4524
Croydon: $1625 WTF!!!
Footscray: $6303

Losing $6k of expenses on my Orange properties really blew things up. In terms of cash, I forked out $20686 but only able to claim $16342. And my overall expenses including depreciation go down by $6103.

If the $2729 state governement NANE payment was assessable I would be $1100 better off on the on each of the Orange properties. I've asked my accountants to prepare the documents for a private ruling to ask that the state government payment be taxed as I don't think that the original drafters of the legislation intended this outcome.

I still think NRAS is worth it in certain circumstances, and I'll keep mine, but it's not as good as I had expected and been led to believe. Unless of course my calcs are still out.

 

Hi @LibGS

Does your property management company claim management fee on the market rent or the subsidised rent that you receive from the tenant ?

 

Subsidised. It's one of the things that annoys me a little about NRAS. The 10% management fee is a bit steep, but that's part of the package.

BTW as I said before, don't let this put you off NRAS, I still think its a great investment, but needs a bit more DD before buying. If the right property came along with 8 years to run, I'd certainly go for it!

 

Thanks for the reply. Yes I do own one NRAS and it has 8.5 years to run but I got stung with 10 % management fee on market rent but not on the actual subsidized rent. Which management company is your NRAS with ? I initially thought NRAS is a good buy but I am not so sure. It wont cost me anything extra but i used NRAS for positive cash flow.