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Edited version of your private ruling
Authorisation Number: 1012444868660
Ruling
Subject: NRAS - election to relinquish entitlement
Question
Are you entitled to a National Rental Affordability Scheme Tax Offset where the approved participant makes an election by way of the sample election document provided?
Answer
Yes.
This ruling applies for the following periods:
· Year ended 30 June 2014
· Year ended 30 June 2015
· Year ended 30 June 2016
· Year ended 30 June 2017
The scheme commences on:
1 July 2013
Relevant facts and circumstances
Entity A is the approved participant under the national rent affordability scheme (NRAS) and has been granted an allocation of units by the Housing Secretary.
Entity A has been issued a certificate which entitles them to the NRAS tax offset.
Entity B intends to purchase a unit from entity A, and then lease back the unit to entity A under a head lease arrangement.
Under the arrangement, entity A must actively seek to sublet the unit to an NRAS eligible tenant under residential tenancy agreements for less than 80% of the market rent.
Entity A will receive NRAS rental income from NRAS eligible tenants under a residential sublease, and will pay the entity B rent payments equal to that amount.
The arrangement between entity A and entity B are considered a NRAS Consortium for the purpose of the NRAS tax offset.
Entity A wish to make an election to relinquish its entitlement to the NRAS tax offset.
Entity B has received a sample form from entity A relinquishing their entitlement to the NRAS tax offset, while adding entity B, as a member of the NRAS Consortium, as the new recipient.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 380
Income Tax Assessment Act 1997 Subsection 380-11(2)
Income Tax Assessment Act 1997 Section 380-13
Reasons for decision
Division 380 of the Income Tax Assessment Act 1997 (ITAA 1997) provides a tax offset to certain entities as a result of certificates issued under the National Rental Affordability Scheme Act 2008.
Election to relinquish entitlement to the NRAS - approved form
Subsection 380-11(2) of the ITAA 1997 states that for the approved participant to be able to make an election to relinquish their entitlement to the NRAS tax offset in favour of a member of the NRAS Consortium, the election must be made in the approved form and within 30 days after the Housing Secretary issues the NRAS certificate.
There is no specific approved form that the Commissioner has published for the purposes of making this election. However a document can be considered to be an approved form if it contains information that the Commissioner requires.
We accept that the sample election document contains the necessary details, and it is therefore considered an 'approved form' for the purpose of the NRAS tax offset.
Trust entitlement to the NRAS Tax Offset after an election made by NRAS approved participant
Section 380-13 of the ITAA 1997 discusses the special rules for trustees of a trust, who are a part of the NRAS Consortium, in relation to elections made by the NRAS approved participant (the electing member).
Where the electing member derives NRAS rent during the NRAS year from an NRAS dwelling covered by the NRAS certificate, and the trustee of a trust derives rent during the NRAS year, all of the following apply:
· the trust is deemed to have been issued with a certificate for its income year, which begins in the NRAS year
· the rental dwelling covered by the certificate is deemed to be that from which the 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.
In your case, entity A will make an election to relinquish its entitlement to the NRAS tax offset in favour of the entity B.
As entity A derives NRAS rent during the NRAS year from the NRAS dwelling covered by the NRAS certificate, and entity B derives rent during the NRAS year, entity B is entitled to the NRAS tax offset.
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