• Eligibility for the NRAS tax offset

    On this page:

    Individuals, corporate tax entities and super funds

    An individual, corporate tax entity or super fund is entitled to claim a refundable tax offset provided both of the following apply:

    • they have been issued with a certificate from the Housing Secretary under the NRAS
    • the income year begins in the NRAS year to which the certificate relates.

    Members of an NRAS consortium

    An individual, corporate tax entity or super fund that is a member of an NRAS consortium

    Where an individual, a corporate tax entity or a super fund is a member of an NRAS consortium, they are entitled to claim a refundable tax offset provided both of the following apply:

    • they have been issued with a certificate from the Housing Secretary under the NRAS
    • the income year begins in the NRAS year to which the certificate relates.

    A partnership or trust that is a member of an NRAS consortium

    Where a partnership or a trust is a member of an NRAS consortium, they are entitled to claim a refundable tax offset provided all of the following apply:

    • they have been issued with a certificate from the Housing Secretary under the NRAS the partnership or trust is taken to have been issued with a certificate for its income year, which begins in the NRAS year
    • the rental dwellings covered by the certificate are those for which the partnership or trustee has derived NRAS rent
    • the amount in the certificate is the total of all the amounts worked out in relation to those rental dwellings.

    The refundable tax offset will flow through to the partners or beneficiaries receiving the NRAS rent indirectly. Alternatively, if a trust has no net income, the trustee will be able to claim the refundable tax offset., where the member did not directly derive NRAS rent.

    Approved participants seeking to relinquish their entitlement must elect to do so.

    Partnerships and trust beneficiaries who indirectly derive NRAS rent from a rental dwelling

    Circumstances may arise where the certificate is issued under the NRAS to an entity but the refundable tax offset is claimed by another entity - for example, when the certificate is issued to a trustee of a trust and the offset needs to be claimed by the beneficiaries. An entity is entitled to claim its share of the refundable tax offset consistent with its share of rental income from its participation in the NRAS through trusts and partnerships.

    An entity that indirectly derives NRAS rent from a rental dwelling as a partner of a partnership, or as the trustee or a beneficiary of a trust, is entitled to claim the refundable tax offset provided both of the following apply:

    • the trust or partnership that directly receives the rental income has been issued, or is taken to have been issued, a certificate from the Housing Secretary under the NRAS applicable to the dwelling
    • the income year of that trust or partnership begins in the NRAS year to which the certificate relates.

    The entity indirectly receiving the NRAS rent may be:

    • an individual
    • a corporate entity (at the time the NRAS rent flows indirectly to it)
    • the trustee of a trust that is liable to be assessed on a share of, or all or a part of, the trust's net income under section 98, 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936) for that income year
    • the trustee of a first home saver account
    • a super fund, an approved deposit fund or a pooled super trust.

    A beneficiary of a trust cannot receive NRAS rent indirectly in any year that the trust has no net income. In this situation, the trustee may be able to claim the refundable tax offset.

    NRAS rent will be taken to flow indirectly to either a beneficiary or the trustee of a trust but not to both.

    NRAS rent flowing indirectly to an entity

    NRAS rent is taken to flow indirectly in an income year to a partner in a partnership, a beneficiary of a trust or the trustee of a trust if all of the following apply:

    • the NRAS rent is derived by the partnership or trustee of the trust, or flows indirectly to the partnership or to the trustee as a partner or beneficiary
    • one of the following conditions is satisfied:  
      • the partner has an individual interest in the partnership's net income for that year or is allowed a deduction for the partnership's loss for that year under paragraphs 92(1)(a) or (b) and 92(2)(a) or (b) of the ITAA 1936
      • the beneficiary has a share of the trust's net income for that year to which paragraph 97(1)(a) of the ITAA 1936 applies, or an individual interest in the trust's net income for that year to which section 98A or 100 of the ITAA 1936 apply
      • the trustee is liable to be assessed on a share of the trust's net income in respect of a beneficiary under section 98 of the ITAA 1936, or assessed on all or part of the trust's net income for that year under section 99 or 99A of the ITAA 1936
      • the entity's share of the NRAS rent as calculated is a positive amount - that is, the entity must be entitled to part or all of the NRAS rent.
       

    NRAS rent will be taken to flow indirectly to either a beneficiary or a trustee of a trust but not to both.

    NRAS rent flowing indirectly through an entity

    This occurs where there is an entity (intermediary entity) and the NRAS rent flows through that entity to another entity (the focal entity). These terms are used to work out an entity's share of the NRAS rent where it flows indirectly.

    The entity's share of NRAS rent

    An entity's share of NRAS rent is calculated under the table in subsection 380-30(3) of the National Rental Affordability Scheme (Consequential Amendments) Act 2008. This calculation is used to work out the entity's share of the NRAS rent where the NRAS rent flows indirectly to the entity. A focal entity's share of NRAS rent is calculated by referring to the share of the intermediary entity's share of the NRAS rent to which the intermediary entity is entitled. Column 2 in the table below provides the intermediary entity's share and column 3 provides the focal entity's share. The table operates so that an entity's share of NRAS rent can be calculated where the distribution flows indirectly to either of the following:

    • a partner in a partnership, or to a beneficiary or trustee of a trust, where the partnership or trustee derives the NRAS rent
    • a partner in a partnership, or to a beneficiary or the trustee of a trust, where NRAS rent flows indirectly to the partnership or trustee through a chain of trusts or combination of trusts and partnerships.

    An entity's share of NRAS rent is its share of the NRAS rent as the focal entity in column 3 of an item in the table.

    In the case of a trust, the table operates so that if deductions exceed assessable income – that is, the trust has no net income - there can be no amount that flows indirectly to a beneficiary or through it to another entity.

    Calculating an entity's share of NRAS rent

    Item

    Column 1

    Column 2

    Column 3

    Identifying the intermediary and focal entities

    The intermediary entity's share of the NRAS rent is

    The focal entity's share of the NRAS rent is

    1

    A partnership is the intermediary entity and a partner in that partnership is the focal entity if both of the following apply:

    • NRAS rent is derived by the partnership
    • the partner has, in respect of the partnership, an individual interest in the partnership's net income or loss for that income year that is covered by subsections 92(1) and (2) of the ITAA 1936 (about income and deductions of partners).

     

    the NRAS rent

    the amount of the NRAS rent that is taken into account in working out the amount of that individual's interest

    2

    A partnership is the intermediary entity and a partner in that partnership is the focal entity if both of the following apply:

    • NRAS rent flows indirectly to the partnership as a beneficiary of a trust
    • the partner has, in respect of the partnership, an individual interest in the partnership's net income or loss for that income year that is covered by subsections 92(1) and (2) of the ITAA 1936 (about income and deductions of partners).

     

    the amount worked out under column 3 of item 3 or 4 of this table where the partnership, as a beneficiary, is the focal entity in that item

    the amount worked out under column 2 of this item that is attributable to the partner, having regard to the partnership agreement and any other relevant circumstances

    3

    The trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if both of the following apply:

    • NRAS rent flows indirectly to the trustee as a partner in a partnership or as a beneficiary of another trust
    • the trustee or beneficiary has, in respect of the trust, a *share amount.

    *A beneficiary has a share amount for an income year if they have either of the following:

    • a share of the trust's net income for that income year that they are presently entitled to and not under a legal disability
    • an individual interest in the trust's net income for the income year that is covered by section 98A or 100 of the ITAA 1936
    • this is the case regardless of whether or not that share amount becomes assessable income in the hands of the beneficiary.

    A trustee has a share amount for an income year if they are liable or would be liable to be assessed in respect of an amount that is either of the following:

    • a share of the trust's net income for that income year under section 98 of the ITAA 1936
    • all or a part of the trust's net income for that income year under section 99 or 99A of the ITAA 1936
    • this is the case regardless of whether or not the share amount becomes assessable income in the hands of the trustee.
     
    • if the trust has a positive amount of net income for that year – the NRAS rent
    • otherwise – nil
     

    the amount worked out under column 2 of this item as is taken into account in working out that share amount

    4

    The trustee of a trust is the intermediary entity and the trustee or a beneficiary of the trust is the focal entity if both of the following apply:

    • NRAS rent flows indirectly to the trustee as a partner in a partnership or as a beneficiary of another trust
    • the trustee or beneficiary has, in respect of the trust, a *share amount.

    *A beneficiary has a share amount for an income year if they have either of the following:

    • a share of the trust's net income for that income year that they are presently entitled to and not under a legal disability
    • an individual interest in the trust's net income for that income year that is covered by section 98A or 100 of the ITAA 1936.

    This is the case regardless of whether or not that share amount becomes assessable income in the hands of the beneficiary.

    A trustee has a share amount for an income year if they are liable or would be liable to be assessed in respect of an amount that is either of the following:

    • a share of the trust's net income for that income year under section 98 of the ITAA 1936
    • all or a part of the trust's net income for that income year under section 99 or 99A of the ITAA 1936.

    This is the case regardless of whether or not the share amount becomes assessable income in the hands of the trustee.

    the amount worked out under column 3 of either of the following:

    • item 1 or 2 of this table where the trustee, as a partner, is the focal entity in that item
    • item 3 or a previous application of this item where the trustee, as a beneficiary is the focal entity in that item.
     

    the amount worked out under column 2 of this item that is attributable to the focal entity in this item, having regard to the trust deed and any other relevant circumstances.

    In item 3 or 4 of the table, the trustee of a trust can be both the intermediary entity and the focal entity in the same item.

    Trustee of a trust

    A trustee of a trust (rather than the trust's beneficiaries) is entitled to a refundable tax offset if the Housing Secretary has issued the trustee a certificate under the NRAS and the trust has no net income. Similarly, a trustee of a trust is entitled to a refundable tax offset if both of the following apply:

    • the NRAS refundable tax offset flows to this trust from another entity because  
      • the trust is a member of an NRAS consortium
      • the trust is a partner of a partnership, or
      • the trust is a beneficiary of another trust that has net income
       
    • the trust to which the offset flows has no net income.

    Trustees assessable on net income of the trust are also entitled to a share of the offset.

    The trustee of a trust that is indirectly entitled to NRAS rent can generally only claim the offset in years the trust has net income.

    If the trustee of a trust is entitled to a refundable tax offset, neither a beneficiary of this trust nor a subsequent entity to which the NRAS rent flows indirectly is entitled to the refundable tax offset.

    Dwelling owners investing under a head lease agreement

    We are aware of certain NRAS arrangements where a dwelling owner leases their dwelling to a housing provider under a head lease and that housing provider subleases the dwelling to eligible NRAS tenants for at least 20% below market value rent. A housing provider in this context is an approved participant under the NRAS scheme and includes charitable housing organisations.

    In some circumstances, these dwelling owners may not be entitled to the NRAS refundable tax offset.

    See also:

    Claiming the NRAS refundable tax offset

    On this page:

    Individuals

    Eligible individuals can claim the NRAS refundable tax offset in their tax return (supplementary section).

    While the tax return label is specific to partnerships and trusts, all individuals making a claim must use this label. This includes individuals who are claiming because they are a member of an NRAS consortium. Do not claim the refundable tax offset under any other tax offset labels.

    Corporate tax entities

    Eligible corporate tax entities can claim the NRAS refundable tax offset, or a share of it, in the Company tax return.

    The amount recorded at J must also be included in the calculation statement.

    Super funds

    Eligible super funds can claim the NRAS refundable tax offset, or a share of it, in the Fund income tax return.

    An eligible self-managed super fund can claim the NRAS refundable tax offset, or a share of it, in the Self-managed superannuation fund annual return.

    Partnerships and partners

    A partnership that has received or is taken to have received an NRAS refundable tax offset certificate can claim the total NRAS refundable tax offset in the Partnership tax return.

    Each partner's share of the NRAS refundable tax offset will be included as part of the statement of distribution in the return.

    The partners of a partnership who are entitled to the NRAS refundable tax offset must claim their share in their respective tax returns.

    The following table shows how to calculate your NRAS tax offset for each dwelling if you are a partner of a partnership who indirectly derives NRAS rent from a rental dwelling.

    Step

    Action

    1

    The certificate the partnership received states the amount of the refundable tax offset for that entity.

    2

    Apportion that amount by the NRAS rent you derive from the dwelling for the income year and the total NRAS rent derived from rental dwellings covered by the certificate for the income year.

    3

    Add together the amounts you have worked out for each dwelling to work out the total amount of your refundable tax offset. This is the amount of the tax offset you can claim in your tax return.

    Trusts, trustees and beneficiaries

    A trust that has received or is taken to have received an NRAS refundable tax offset certificate can claim the total NRAS refundable tax offset amount in the Trust tax return.

    Each beneficiary's share of the NRAS refundable tax offset will be included in the Statement of Distribution in the return.

    The beneficiaries of a trust who are entitled to the NRAS refundable tax offset must claim their share in their respective tax returns.

    If the trust has no net income, the full amount of the NRAS refundable tax offset will be included under the column entitled 'Income to which no beneficiary is presently entitled and in which no indefeasible vested interest, and the trustee's share of credit for tax deducted' in the statement of distribution in the Trust tax return.

    The following table shows how to calculate your NRAS tax offset for each dwelling if you are a trust beneficiary who indirectly derives NRAS rent from a rental dwelling.

    Step

    Action

    1

    The certificate the trust received states the amount of the refundable tax offset for that entity.

    2

    Apportion that amount by the NRAS rent you derive from the dwelling for the income year and the total NRAS rent derived from rental dwellings covered by the certificate for the income year.

    3

    Add together the amounts you have worked out for each dwelling to work out the total amount of your refundable tax offset. This is the amount of the tax offset you can claim in your tax return.

     

    Example

    Matthew and Jessica are beneficiaries of Trust X. Trust X derives NRAS rent of $160,000. Matthew and Jessica are each entitled to 50% of this income. Trust X received a certificate on 15 June 2016 for the 2016 income year stating that the refundable tax offset in relation to Trust X's participation in the NRAS is $60,000.

    Matthew is entitled to claim a refundable tax offset of $30,000, which is worked out as follows:

    Step

    Action

    1

    The certificate the trust received states that the amount of the refundable tax offset for that entity is $60,000.

    2

    ($60,000x ($80,000/ $160,000))=$30,000

    3

    Matthew can claim a refundable tax offset of $30,000 in the income year that begins in the NRAS year ending 30 April 2016.

     

    End of example

    Income tax exempt entities

    Endorsed charitable institutions participating in the NRAS in their own right can receive their NRAS incentive as a payment from the Housing Secretary. Where an NRAS participant was an endorsed charitable institution for only part of an NRAS year, special apportionment rules apply.

    An income tax exempt entity that is entitled to the NRAS refundable tax offset can claim it by completing the Application for refund of tax offset – National rental affordability scheme – Income tax exempt entities (NAT 72789).

    Members of an NRAS consortium

    Members of an NRAS consortium who are entitled to the NRAS refundable tax offset must claim their share in their respective tax returns.

    The following table shows how the NRAS tax offset is calculated per dwelling for a member of an NRAS consortium.

    Step

    Action

    1

    The certificate the approved participant of the NRAS consortium receives from the Housing Secretary states the amount of NRAS tax offset for each rental dwelling. The approved participant should identify your share of the NRAS tax offset.

    2

    Divide the amount of NRAS rent you derived from the dwelling for the income year by the total NRAS rent derived from that rental dwelling for the income year. If you were the only one deriving rent from this dwelling, the answer to step 2 will be equal to 1.

    3

    Multiply the amount at step 1 by the amount you worked out at step 2. The result is the amount of NRAS tax offset you are entitled to for that rental dwelling.

    4

    If you have derived NRAS rent for more than one rental dwelling, repeat steps 1–3 for each rental dwelling.

    5

    Add together the amounts you worked out at step 3 for each rental dwelling you derived NRAS rent from. This is the amount of NRAS tax offset you are entitled to.

    6

    Claim the amount at step 5 in your tax return.

      Last modified: 01 Nov 2016QC 21519