NRAS Incentive changes for charities

Expanded opportunities for charities to receive NRAS Incentive as tax offset certificate

As of 3 July 2013, changes to the National Rental Affordability Scheme (NRAS) Regulations mean that Approved Participants which are endorsed charitable institutions have another opportunity to receive the Commonwealth component of the NRAS Incentive as a refundable tax offset certificate. This is principally applicable to those charities that are operating investor-based NRAS models.

In certain circumstances, offering the NRAS Incentive as a refundable tax offset certificate can be attractive to NRAS investors, as it can offer better consequences for their personal income tax, including ensuring that the NRAS Incentive is not taxable in the hands of the investor.

How the Incentive is changing for charitable institutions

To date charitable institutions were only able to receive the NRAS Incentive as a cash payment where they had already elected to receive the Incentive as a refundable tax offset certificate by 13 May 2011. They can also elect to receive the incentive at the time of accepting an offer of Allocations from the Commonwealth Government and that ability is not affected by the amendments.

As a result of the amendments, Approved Participants which are endorsed as charitable institutions and currently receive the Incentive in cash form for existing NRAS Allocations have another opportunity to elect to receive the Incentive as a refundable tax offset certificate for these Allocations.

We note that the Explanatory Memorandum appears to conclude that the Regulation permits the election to apply to Incentives that have not yet been paid and therefore, depending on your circumstances, the amendments would potentially apply to the 2012/2013 NRAS Year. The Explanatory Memorandum states that an election must be made prior to the payment of the Incentive, however as the position is not yet settled we recommend separate advice be taken on this point.

What does it mean for me?

As this amendment was not anticipated, consideration should be given to whether your existing contractual obligations with investors permit you to make the election.

If you would like to take advantage of the changes, you need to communicate your election to the Department of Family, Housing, Community Services and Indigenous Affairs (FaHCSIA) by 30 September 2013 (that is before 1 October 2013).

If you have already made an election with FaHCSIA under the previous arrangements, you do not need to do anything to continue accessing the Incentive as a refundable tax offset certificate.

Questions? Feel free to call us on (07) 3837 3600.

DISCLAIMER: This update provides an overview only of the changes to the NRAS Regulations and is not all inclusive. It should not be considered to be legal advice. You should obtain legal advice for your specific circumstances before relying on general information.