Affordable Housing Update: Changes to the National Rental Affordability Scheme Regulations 2008

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Written by:

Mark Fowler

Our clients would be aware that in the final months of 2017 two sets of legislative amendments were made to the National Rental Affordability Scheme Regulations 2008. In this update we canvass the key areas for consideration within the amendments.

The National Rental Affordability Scheme Amendment (Investor Protection) Regulations

The stated aim of the Investor Protection Regulations is to create stronger protections for investors under the National Rental Affordability Scheme (NRAS) to encourage investors to remain in the NRAS and to ensure allocations are not lost from the NRAS as a result of an Approved Participant’s conduct. The following key changes have been introduced by the Investor Protection Regulations to achieve these outcomes:

  1. New obligations have been imposed on Approved Participants with respect to investors. Approved Participants must now:
    1. Comply with contractual requirements to pass on the NRAS incentive to investors;
    2. Comply with consumer protection laws; and
    3. Not provide false or misleading information to the Secretary of the Department of Social Services (the Secretary) or the Department of Social Services (DSS);
  2. Additional powers have been granted to the Secretary. The Secretary may:
    1. Transfer an allocation in the Secretary’s own initiative or at the request of an investor, on certain grounds; and
    2. Revoke an allocation if an Approved Participant provides false or misleading information to the Secretary or the Department of Social Services.

The Investor Protection Regulations also make other changes in relation to the indexation of household income limits for eligible tenants and in relation to the form and content of annual statements of compliance.

New Obligations on Approved Participants

  1. Passing on the NRAS incentive to investors (‘Division 2, Part 4 Obligations’)

An Approved Participant must pass on the NRAS incentive to an investor, if under a contractual arrangement with the investor, the Approved Participant is required:

  1. To make payment to an investor in relation to the NRAS incentive;
  2. To take steps to enable the investor to claim a tax offset; or
  3. Make an election to claim a tax offset in relation to the incentive.

The Approved Participant must pass on the incentive to the investor within a reasonable time after receiving the incentive. These obligations apply to Approved Participants who receive an incentive on or after 18 November 2017.

  1. Compliance with laws

Previously, Approved Participants were only required to ensure that approved rental dwellings complied with landlord, tenancy, building, and health and safety laws. Now, Approved Participants must specifically ensure they also comply with consumer protection laws in relation to their allocation. Under the Investor Protection Regulations, Consumer protection laws mean:

  1. The Competition and Consumer Act 2010 (Cth) which contains the Australian Consumer Law);
  2. The Australian Securities and Investments Commission Act 2001 (Cth);
  3. The Corporations Act 2001 (Cth);
  4. Each State or Territory’s Fair Trading Act or Consumer Affairs and Fair Trading Act; and
  5. Each State or Territory’s Sale of Goods Act or Goods Act. 

 

  1. Not provide false or misleading information

Previously, an Approved Participant was prohibited from providing false and misleading information in relation to an application for the allocation, before the allocation was made. The Investor Protection Regulations insert a new condition of allocation, which prohibits Approved Participants from providing false or misleading information to the Secretary or DSS or knowingly omit relevant information.

Failure to comply with items b and c directly above, whether before on or after 18 November 2017, gives rise to grounds for the Secretary to transfer or revoke the Approved Participant’s allocation, as further discussed below.

The Secretary’s power to transfer an Allocation
The Secretary now has the power to transfer an allocation from one Approved Participant to another Approved Participant, by request from an investor or by the Secretary’s own volition, provided one of the following grounds exist:

  1. the Approved Participant has failed to comply with a condition of the allocation;
  2. the Approved Participant has failed to comply with its obligation to pass on an incentive or to pass on an incentive within a reasonable time;
  3. the Approved Participant has provided false or misleading information about the NRAS to an investor and includes giving misleading information about the status of an incentive;
  4. the Approved Participant’s conduct in relation to the allocation has contravened a consumer protection law;
  5. if the Approved Participant received a tax offset certificate in respect of an approved rental dwelling—the relevant approved participant has claimed a tax offset (or a part of a tax offset) in relation to the certificate to which the Approved Participant was not entitled;
  6. if the Approved Participant is likely to be de-registered as a company by the Australian Securities and Investments Commission or a court has ordered the de-registration;  
  7. the Approved Participant has:
    1. become bankrupt; or
    2. taken steps to take the benefit of any law for the relief of bankrupt or insolvent debtors; or
    3. compounded with one or more of his or her creditors; or
    4. made an assignment of his or her remuneration for the benefit of one or more of his or her creditors;
  8. any application under the Regulations by the Approved Participant:
    1. included information that is false or misleading; or
    2. failed to include information that the relevant approved participant knew, or ought reasonably to have known, was relevant.

The Secretary’s power to transfer an allocation on grounds (a), (b), (c), (d), (e) and (h) directly above apply regardless of whether the conduct giving rise to those grounds occurred before, during or after 18 November 2017. The Secretary’s power to transfer an allocation based on grounds (f) and (g) above will apply to conduct that occurred after 18 November 2017.
The Secretary is also obliged to notify the Approved Participant of the proposed transfer of allocation and invite the Approved Participant to make submissions in response to the proposed transfer within certain timeframes.

The Secretary’s power to revoke an Allocation
Under the Investor Protection Regulations, the Secretary may also revoke an Approved Participant’s allocation if any of the grounds listed at items (a), (b), (c), (d) and (e) directly above apply regardless of whether the conduct giving rise to those grounds occurred before, during or after 18 November 2017. The Secretary’s power to transfer an allocation based on grounds (f) and (g) directly above will apply to conduct that occurred after 18 November 2017.
New regulation 22B also sets out a non-exhaustive list of matters the Secretary may take into account in deciding whether to transfer or revoke an allocation.

Other Changes
The other changes which parties involved in the NRAS should be aware of relate to the tenant income index and statement of compliance.
Under the Investor Protection Regulations the indexation of household income limits will now use the December quarter Consumer Price Index figures to allow more time for Approved Participants to update their systems to reflect the new household income limits before the end of the NRAS year.
Further, the form and content of the statement of compliance which must be submitted by Approved Participants annually now requires the Approved Participant:

  1. to ensure the statement of compliance is in the form approved by DSS;  
  2. to provide details of each of the investors for the approved rental dwelling;
  3. to provide a statement that at all times during the year, the Approved Participant has complied with consumer protection laws in relation to the allocation (or details of how they did not comply);
  4. to provide a statement that the Approved Participant complied with the new Division 2, Part 4 Obligations; and
  5. any other information on the statement of compliance form.


The National Rental Affordability Scheme Amendment (Approved Participant Obligations) Regulations
 The Approved Participant Obligations Regulations provide that an Approved Participant must not terminate their contractual relationship with the owner of an NRAS dwelling, or withhold the payment of an NRAS Incentive, on the basis that the owner has refused to use a tenancy management service (or any other similar, or other, service) nominated by the Approved Participant.

Similarly, the Approved Participant Obligations Regulations states that an Approved Participant must not terminate their contractual relationship with the owner of an NRAS dwelling, or withhold the payment of an NRAS Incentive, where the Approved Participant requires an owner to pay a bond to a tenancy management service and the owner has not paid that bond.

Approved Participants should give consideration to the application of both the Investor Protection Regulations and the Approved Participant Obligations Regulations to their existing NRAS models.

The foregoing is general advice only and may not apply in specific circumstances. It cannot be relied upon without specific consideration of the individual circumstances of any charity.

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