Example 5: Parties in a non-entity joint venture participating in NRAS (before the 2010-11 income year)

For an example of a non-entity joint venture that does not give the dwelling owners an entitlement to an NRAS tax offset, refer to ATO ID 2009/146External Link.

From 2010-11 income year onwards, the law has been amended to allow approved participants of NRAS consortiums to relinquish their entitlement to the NRAS tax offset in favour of certain other members of their consortium where the member did not directly derive NRAS rent.

Approved participants seeking to relinquish their entitlement must elect to do so. For more information about making the election, see Election to relinquish your entitlement to the NRAS tax offset.

End of example

Example 6: Members of an NRAS consortium participating in the NRAS under a head lease/sublease arrangement in circumstances outlined in ATOID 2009/146 (from the 2010-11 income year onwards)

Chameleon Housing is established as an NRAS consortium. The approved participant of the consortium is the manager. The manager applies to the Housing Secretary to participate in the NRAS and represents the parties to the consortium. The dwelling owners enter into a head lease with the manager of the consortium. The manager of the consortium then enters into a sublease with NRAS eligible tenants.

Under this arrangement, it is the manager (approved participant) of Chameleon Housing that derives NRAS rent from the eligible tenants under the sublease. The dwelling owners derive ordinary rent (not NRAS rent) from the manager under the head lease. These facts are identical to those addressed by ATO ID 2009/146. Following the completion of the NRAS year, the Housing Secretary issues the manager representing the consortium with a certificate in relation to the rental dwelling.

If an election is not made, the manager would be entitled to a tax offset, as the manager is the entity deriving NRAS rent. The dwelling owners, having not derived any NRAS rent, would not be entitled to a tax offset. This is not NRAS rent for the reasons given in ATO ID 2009/146.

Alternatively, the parties to the consortium may have predicated their participation in the NRAS on the basis that the NRAS incentive would be enjoyed by the dwelling owners, rather than the manager. To achieve this outcome, following receipt of the certificate from the Housing Secretary, the manager may elect to relinquish its entitlement to a tax offset for the income year corresponding to the NRAS year covered by the certificate.

If the manager makes the election, each party's entitlement to the NRAS tax offset for a dwelling would be in proportion to their share of the ordinary rent derived in relation to that dwelling, for the time in the NRAS year covered by the certificate in which the dwelling was eligible for the NRAS incentive. In this example, the ordinary rent derived from a rental dwelling means the rent derived by a dwelling owner under the head lease (that is, the rent derived by the dwelling owner from the manager of the consortium). Although this is not NRAS rent, it is rent ultimately sourced from the NRAS rent derived by the manager.

In this example, the dwelling owners are the ultimate recipients of all of the rent in respect of the property, under the head lease. Each dwelling owner therefore would be entitled to a portion of the tax offset but only if the election is made. The manager, having made the election, and not being the ultimate recipient of any rent in respect of the dwelling, is no longer entitled to any tax offset.

End of example
    Last modified: 30 Jul 2015QC 21519