Rental. National. Affordability. the Questus Residential Investment Fund. National Rental Affordability Scheme and NRAS

Transcription

1 and the Questus Residential Investment Fund National Rental Affordability Scheme NRAS A GOVERNMENT INCENTIVE NATIONAL RENTAL AFFORDABILITY SCHEME 105 Railway Road Subiaco WA 6008 PO Box 1533 Subiaco WA 6904 Tel Fax

2 and the Questus Residential Investment Fund This document is a brief summary of the requirements and obligations under the (NRAS) and Questus Residential Investment Fund (QRIF) for an investor of an NRAS Approved Property. All potential investors who wish to acquire an Approved NRAS Property should read the Product Disclosure Statement issued by Questus Funds Management Limited for the Questus Residential Investment Fund and also refer to the Federal Government s website for a copy of the NRAS Guidelines, Regulations and Act at and go to: Our Responsibilities > Housing Support > Programs & Services >. What is the? NRAS is a long term commitment and initiative by the Federal Government, to address the shortage of affordable rental housing, by offering financial incentives to build and rent dwellings to low and moderate income households at least 20% below market rates. The Government Incentives are tax free incentives, available each year for 10 years to owners of NRAS Approved Properties. The primary focus of NRAS is to: increase the supply of affordable rental dwellings reduce rental costs for low to moderate income households encourage large scale investment and delivery of affordable housing What is an Approved Participant? What is an NRAS Approved Property? The guidelines set out by NRAS include: An Approved Participant has applied for the approval of dwellings with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA). Questus Funds Management Limited (QFML) is the Responsible Entity for the Questus Residential Investment Fund, and in accordance with the NRAS legislation, has been granted status as an Approved Participant. QFML is the holder of over 4,300 NRAS allocations and is one of the largest Approved Participants in Australia. One that is approved to receive the NRAS incentives for up to 10 years. A property must be rented at a discount at least 20% below the market rent. A property can only be tenanted by an eligible tenant/s. An annual Statement of Compliance must be submitted. Use of specialist housing and tenancy managers to ensure compliance with NRAS. Page 2

3 Investment Benefits Security of Real Property Your Approved NRAS Property may be a house and land package or a completed apartment or townhouse not previously resided in. Questus Funds Management Limited has already made application to the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to have approved NRAS properties available for sale and participation in the Questus Residential Investment Fund, which can be arranged through Questus. Increase in Property Value The value of many asset classes and investments may fluctuate over time. Investments in direct property have generally showed consistent returns and have demonstrated to be less volatile than other asset classes and investments such as listed equities. No Property Management Hassles Questus has sourced property approvals from the Government to provide an alternative in affordable rental housing. To maintain compliance with NRAS, it is necessary for the Approved NRAS Properties to be managed by an approved Property and Tenancy Manager appointed by Questus Funds Management Limited, so there is no need for you to worry about rent collection or tenancy management. As your underlying investment is You Own the Property direct real property, you will benefit in any capital growth. Any increase in the value of property has taxation implications. Other Taxation Benefits All property investments offer certain tax related benefits such as depreciation. By owning an Approved Government Incentives Paid to QRIF $ NRAS National Rental Affordability Scheme NRAS Property directly all the taxation benefits and deductions are available to you. Other expenses associated with owning property, such as; property management, insurance, Your Approved NRAS Property and interest expenses may also be deductible. Government A significant taxation benefit of an Approved NRAS Property is that the Government Incentives are a refundable tax offset (RTO) and NRAS Rent from Tenant Paid Direct to YOU Incentives $ Paid to YOU non assessable non exempt income (NANE), that is; they are tax free. You should seek your own Investor (You) independent tax advice to find out what tax benefits are available to you. Page 3

4 Questus & Questus Residential Investment Fund Who is Questus Limited (Questus)? Questus is an Australian Securities Exchange (ASX) listed Funds and Investment Management Company focused on direct property based investments across Australia. What is the Questus Residential Investment Fund (QRIF)? The QRIF was established by Questus as a means to allow investors who acquire an Approved NRAS Property to receive the various Government Incentives provided for under NRAS. The QRIF is a non-entity joint venture managed investment scheme, and will take care of all the statutory reporting that is required under NRAS for investors to receive the NRAS tax-free incentives. Why do I have to participate in the Questus Residential Investment Fund? As the NRAS incentives can only be paid to an NRAS Approved Participant, your participation in the QRIF ensures management and distribution of your refundable tax offset from the Federal Government and your non assessable non exempt payment from the respective State and Territory Governments. Property Investment Comparison - with and without NRAS Example NO NRAS WITH NRAS House & Land Property Investment $395,000 $395,000 Stamp Duty & Settlement Costs $6,275 $6,275 Total Investment $401,275 $401,275 Income Rental Income - Taxable $19,000 $15,200 Government Rental Incentives - TAX FREE Nil $10,350 Total Income $19,000 $25,550 Expenses Total Property Expenses, Management Fees, Interest etc $30,639 $31,208 Tax Position Total Tax Allowances Available (includes Interest, Depreciation & Property Expenses) $40,378 $40,378 Tax Loss (Negative Gearing) $21,378 $25,178 Tax Benefit at Marginal Tax Rate $8,231 $9,694 NET SURPLUS AFTER TAX -$3,408 $4,056 Note: The information included in this example is provided as a guide only and all potential investors should consult their professional advisor. Assumptions - Gearing Level on Property 100%, Current Variable Interest Rate on Loan of 6.2% PA, Market Value Weekly Rent (Before NRAS* Discount) of $380, and Investor Marginal Tax Rate 38.5%. NRAS incentive index based on 2013/2014 NRAS Year. Page 4

5 About the NRAS Incentives Why am I entitled to receive the incentives? By purchasing an NRAS Approved Property you agree to rent your property at a reduced market value rent rate of at least 20% to an eligible tenant for a period of up to 10 years. How much are the incentives? The current 2013/2014 NRAS year incentives are $10,350. Incentives are indexed annually to the rental component of the Housing Group Consumer Price Index. When will I receive my incentives? The NRAS year runs from 1 May to 30 April. QRIF is required to lodge the annual compliance report for your property in May of each year. Typically the Federal, State and Territory Government incentives are announced in July, with the State/Territory Government portion generally being available in September. How are the incentives paid? Once the Federal Government have finalised and confirmed the Incentive amounts to Questus, we will write to you detailing the two components of your incentives, along with an invoice for the Questus Annual Management Fee. The two components are: Federal - is a Refundable Tax Offset (RTO) that you will need to submit with your annual tax return to the Australian Taxation Office (ATO). The RTO reduces the amount of tax you pay until it reaches zero and any unused portion is then refundable in cash. State and Territory - is generally paid as Cash (meaning non assessable non exempt income) or as an additional RTO (which varies from State or Territory). The Cash component will be paid by direct deposit into your nominated bank account once received from the relevant State and Territory Government, providing Questus have received payment of your Annual Management Fee invoice. If the State provides the component as an RTO you will need to include the RTO in your annual tax return to the ATO. Page 5

6 Property & Tenancy Management What does the Property Manager do? The Property Manager is responsible for liaising between you and the Tenancy Manager. They ensure the Approved NRAS Property complies with the scheme and carry out normal property management duties, including maintenance and repairs. What is a Tenancy Manager? A Tenancy Manager is selected by the QRIF in each state or territory and is generally a not for profit or specialist housing organisation. They are responsible for ensuring prospective tenants meet the eligibility criteria set out by NRAS. Who can rent my Property? Tenants for the properties are required to meet the NRAS Income Eligibility Limits, which are reviewed and updated annually in line with the NRAS year. Income Eligibility Limits 2013/2014 NRAS YEAR Household Type ANNUAL INITIAL Income Upper Income Limit One adult $45,956 $57,445 How is the Market Value Rent Rate determined? Two adults $63,535 $79,419 Three adults $81,114 $101,393 The market rent is determined by an Independent Valuation, which is conducted on behalf of and generally payable by the owner of the property. Under the scheme the market rent will initially be set by an independent valuation. In subsequent years it will be determined once a year by either of the following: Rental increases capped by Independent Valuation: at the start of years 4 and 7. Consumer Price Index: at the start of years 2, 3, 5, 6, 8, 9 and 10 it will be determined by the rental growth in the location of the property. Can I manage the property myself? No, as due to the NRAS compliance requirements, FaHCSIA encourages the use of specialist housing and tenancy managers, which are appointed by the QRIF in each state or territory. Sole parent with one child $63,579 $79,474 Sole parent with two children $78,822 $98,528 Sole parent with three children $94,065 $117,581 Couple with one child $78,778 $98,473 Couple with two children $94,021 $117,526 Couple with three children $109,264 $136,580 To maintain eligibility as a tenant in the scheme, the tenant s income can increase above the Initial Income by 25 per cent. A tenant ceases to be eligible when income exceeds the upper income limit in two consecutive years. (These limits are indexed annually on 1 May in accordance with the NRAS Tenant Income Index.) Do I have a say over who the tenants are? Yes, as the owner of the property you may. The property is managed essentially the same way a normal rental property would be. The Tenancy Manager is able to supply the owner with information on the eligible tenant and providing the tenant meets the requirements of the scheme, you may have the final say. Can one of my relatives live in my NRAS Approved Property? Yes, but if you nominate a tenant, they will still be required to go through the same eligibility process with the Tenancy Manager. Page 6

7 General Information Do I own the property I am purchasing? Yes, when you purchase the Approved NRAS Property you will own it. You generally acquire the Approved NRAS Property under a normal offer and acceptance (or sale contract), and will also be required to participate and enter into the QRIF so you can receive the incentives. How do I invest in an NRAS Approved Property? As with any investment, we recommend that you should speak with your own professional financial advisor or contact Questus. What fees do the QRIF charge in relation to receiving NRAS Incentives? Fees you will incur for your interest in the QRIF are: Establishment Fee - $11 per NRAS Dwelling which is a one-off fee. Management Fee - 5.5% of the annual incentive amount. QRIF will invoice Investors for the Annual Fee, which is payable prior to the release of any NRAS incentives. What other costs can I expect to pay for my NRAS Approved Property? When you purchase the property you will incur the normal costs associated with owning an investment property, such as advertising fees, letting, inspection and ongoing management fees, insurance, rates, body corporate or strata levies, and maintenance. Tenancy letting and ongoing property management fees for an NRAS Property are higher than standard residential investment properties due to the level of compliance and tenancy eligibility checks, which will vary from state to state. Property and Tenancy management fees are estimated at 10% plus GST of the Market Value Rent (i.e. 12.5% plus GST of the Gross NRAS Rent). Can I sell my NRAS Approved Property? Yes you can sell your property at any time. The purchaser will be able to participate in NRAS if they wish. You should seek your own independent tax advice when you decide to dispose of the Approved NRAS Property. Can I exit from NRAS and live in my property? Yes you can. QRIF do not charge a fee to exit, however, there may be other fees and charges incurred in relation to the Approved NRAS Property and the Property and Tenancy Manager services provided. Page 7

8 Enquiries to: Telephone Questus Residential Investment Fund ARSN Managed by Questus Funds Management Limited ABN AFSL Issued June 2013 *IMPORTANT NOTICE: The Government Incentives for the 2013/2014 NRAS year are $7,763 per annum and $2,587 per annum from the Federal, State and Territory Governments respectively. The Government Incentives are provided under the (NRAS). The Incentives are in the form of refundable taxation offsets or non-assessable income subject to the conditions of NRAS, with Investors applying for an interest in the Questus Residential Investment Fund (Fund). A purchaser of an NRAS Approved Property will agree to rent the property at least 20% below market rental rates and only rent the property to approved eligible tenants. The Government Incentives are indexed to the rental component of the Consumer Price Index (CPI) each year. The offer for properties which are approved to receive the Government Incentives is made via the Fund. Investors will need to obtain a copy of the Product Disclosure Statement (PDS) issued by Questus Funds Management Limited. Further information regarding the tax free Government Incentives can be found on