Example 2: Two companies participate in NRAS as a partnership
Homes For You Ltd is a company in the construction business. Perfection Properties Ltd is a real estate agency. The two companies establish a partnership to participate in the NRAS (the 'NRAS Partnership').
The partners agreed that Homes For You would finance and build 25 rental dwellings and Perfection Properties would manage them once built. They also agreed that Homes For You would receive a 90% share of the partnership income and Perfection Properties a 10% share.
Perfection Properties Ltd applied on behalf of the NRAS Partnership and received an allocation of 25 rental dwellings under the NRAS. The dwellings were completed and eligible NRAS tenants started renting them for 20% below market value on 20 October 2010.
The NRAS Partnership complies with all the requirements set out by the DSS and Perfection Properties Ltd lodges a statement of compliance on behalf of the NRAS Partnership on 13 May 2011.
The NRAS Partnership derived NRAS rent for the 2010-11 income year. Each partner has an interest in the partnership's net income, including a share of the NRAS rent derived by the partnership, so that NRAS rent flows indirectly to them through the partnership. Homes For You has a 90% share of NRAS rent and Perfection Properties a 10% share.
On 30 June 2011, the NRAS Partnership receives an NRAS tax offset certificate from the Housing Secretary. The certificate is for the NRAS year 1 May 2010-30 April 2011.
Homes For You and Perfection Properties are participating in the NRAS in a partnership. As NRAS rent flows indirectly to the partners and the partnership has received a certificate from the Housing Secretary, the partners are entitled to their respective share of the NRAS tax offset under section 380-15 of the Income Tax Assessment Act 1997.
The partners will claim their entitlement to an NRAS tax offset in their respective company tax returns. The shareholders in the companies will not have an entitlement to the NRAS tax offset; however, they may receive an economic benefit from the offset in the form of an assessable dividend.
End of example