Community housing providers (CHPs) deliver social and affordable housing at below-market rents, funded through a combination of government grants, government incentive schemes, philanthropy, and their own rental income. The bookkeeping complexity reflects the funding model: multiple income streams, each with different assessability and GST treatment, combined with the not-for-profit compliance obligations that apply to most CHPs. This guide addresses the key technical areas.
The National Rental Affordability Scheme (NRAS)
NRAS is a Commonwealth-state housing scheme established under the National Rental Affordability Scheme Act 2008 (NRAS Act) and the National Rental Affordability Scheme Regulations 2020. NRAS is closed to new entrants — no new allocations have been made since 2013 — but existing participants continue to receive incentives until their allocation period expires (typically 10 years from the first year of the incentive).
The Two-Component Incentive
NRAS incentives have two components:
-
Commonwealth NRAS Tax Offset: A refundable tax offset available to the participant (or, where allocated to a managed investment scheme, to individual investors in that scheme). For the 2025–26 income year, the offset is indexed annually and was approximately $12,000 per dwelling per year.
-
State/Territory Government Contribution: An in-kind or cash contribution equivalent to 25% of the Commonwealth offset, delivered as either cash, an equivalent in-kind service (such as land, property management, or infrastructure), or other support.
ATO's position on assessability: The ATO's view, confirmed in Tax Determination TD 2013/22, is that NRAS incentives received by a CHP are assessable income under s.6-5 of the ITAA 1997 (ordinary income) or s.15-10 (government grants). The refundable tax offset itself is applied against the entity's income tax liability; any excess is refunded. This is distinct from a non-refundable offset that merely reduces tax payable.
For a CHP holding 50 NRAS dwellings, the annual income recognition from NRAS incentives may be in the order of $600,000 — a material figure that must be recognised in the period the incentive is earned (each NRAS year, which aligns with the income year).
GST on NRAS-Funded Dwellings
Residential rental of NRAS dwellings is an input-taxed supply under s.40-35 of the GST Act — the same treatment as any residential rental. No GST is charged on the below-market rent, and no ITCs are available on maintenance, management, and repair costs directly attributable to the rental supply. This is the core tension in CHP bookkeeping: NRAS incentive income is assessable, but the costs of providing the housing generate limited ITC relief.
Rental Income: Below-Market Rents Still Assessable
Community housing providers are required under NRAS (and under their registration as a Tier 1, 2, or 3 CHP under the National Law for the National Regulatory System for Community Housing) to charge rent at a specified discount to the market rate — typically 20–25% below market.
The below-market rent is still assessable income — the full rental amount received (even though it is below market) must be recognised. There is no concession that treats the forgone market rent as exempt. The financial model works because NRAS incentives and state government subsidies make up a portion of the income foregone.
CHPs operating outside NRAS — for example, providing housing under a Direct Allocation Agreement with a state housing authority — similarly receive rental income that is assessable, regardless of the concessional rate.
DGR Status for Community Housing Providers
Deductible Gift Recipient (DGR) status enables a community housing provider to receipt tax-deductible donations from individuals and businesses. Under s.30-55(1) and Item 1 of the Table in s.30-55(2) of the ITAA 1997, a "community housing provider" endorsed by the ATO as a DGR must:
- Be a not-for-profit organisation (not carried on for private benefit)
- Provide affordable rental housing to people who are in housing need
- Meet the requirements of the ITAA 1997 Regulations specifying DGR eligibility for community housing entities
DGR endorsement allows the CHP to issue donation receipts to donors, who can then claim a deduction under s.30-15. This is significant for CHPs seeking philanthropic capital and corporate partnerships.
Bookkeeping implication: DGR donations must be tracked separately from government grants and operational income. Conditions attached to donations (restricted gifts for specific capital projects) may require a separate restricted fund account and cannot be recognised as available general income until the conditions are met.
GST Concessions for Not-for-Profit CHPs
Community housing providers that are registered not-for-profit entities may access the following GST concessions:
- Reduced ITC entitlement: As an input-taxed residential rental supplier, the CHP has limited ITC entitlement on costs directly related to its rental properties. However, administration, fundraising, and advocacy costs may generate ITCs to the extent they relate to the CHP's taxable activities (if any exist).
- Not-for-profit concessions: Under Div 63 of the GST Act, eligible not-for-profit bodies can access a GST refund where they have excess ITCs from non-business activities. The application is limited and specific — seek specialist advice before relying on this concession.
Rents on residential properties remain input-taxed regardless of the CHP's not-for-profit status. This is one area where the not-for-profit status does not improve the GST position.
Government Grants: Capital vs. Revenue Classification
CHPs receive a range of government grants. The bookkeeping treatment differs materially based on the nature of the grant:
Operational/revenue grants — grants that fund the day-to-day management of the housing portfolio (tenancy management, maintenance administration, community support services) are generally assessable income in the year received. These are s.6-5 ordinary income.
Capital grants — grants provided specifically to fund the acquisition or construction of a property asset may be treated as a capital contribution that reduces the cost base of the asset. The ATO's analysis turns on whether the grant was made for a capital purpose (acquiring or improving an asset) and whether any conditions link repayment to asset disposal. ATO TR 2006/3 provides guidance on government grants to not-for-profit entities.
Where a grant is conditional (e.g., repayable if the property is not used for social housing for 20 years), it may not be assessable income until conditions are met — or it may create a liability until conditions are satisfied. Each grant agreement must be assessed individually.
GST on government grants: Government grants are generally not subject to GST (they are not consideration for a supply made by the CHP to the government). However, grants that involve a supply by the CHP to the government (for example, a contract to provide housing management services) may include a GST component. Review whether the CHP is making a supply or simply receiving a grant — the distinction determines GST treatment.
End-of-Period Checklist
- NRAS incentive income recognised in the NRAS year earned; Commonwealth offset applied to income tax liability; excess refund recorded as receivable
- Rental income recognised on an accruals basis; below-market rents recorded at actual amounts received (not grossed up to market rent)
- Input-taxed residential rental supply confirmed; no GST on rent; ITC restricted on directly attributable maintenance and management costs
- DGR donation receipts issued only for gifts to which DGR endorsement applies; restricted gifts held in separate fund account
- Government grants assessed: operational (assessable income) vs. capital (reduce asset cost base); assessment documented in work papers for each new grant received
- AASB 120 (government grants) or AASB 1058 (income for not-for-profits) applied as appropriate, depending on whether the CHP prepares general purpose or special purpose financial statements
- Annual NRAS compliance report prepared for the Department of Housing; data consistent with bookkeeping records
- Payroll: tenancy management staff wages processed through STP; super guarantee applied; leave entitlements accrued under applicable Modern Award