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November 15, 2023 by ash

5 Things You Should Know About NDIS Investment Properties

NDIS is an Australian government-run program that was introduced in 2016 with the aim of improving the well-being of Australians with disabilities. According to the government, around 4.4 million Australians live with disabilities. 

Specialist Disability Accommodation (SDA) is a key component of the NDIS. Individuals with high support needs or functional impairments are accommodated in SDA housing. 

Due to the severe shortage of suitable housing, there is a significant demand for more suitable housing. Due to this, the government has offered longer tenancies and higher rents than average to attract private investors. 

The current high returns could make NDIS properties a great investment option for property investors despite the several hoops involved. 

Before you commit to an NDIS property investment, there are a few things you need to know. Here are the top five things you should consider before making a decision.

1. Specialist Disability Accommodation Investments Require The Same Due Diligence As Other Real Estate Investments

Despite NDIS properties being in high demand and offering great returns on paper, any investment comes with risk, and you should always conduct due diligence before investing. 

Beyond the traditional due diligence steps, such as getting pre-approval for a home loan, conducting inspections, and making sure you have sufficient cash flow to sustain your lifestyle and investment, it is important that you understand the special requirements that must be met in order to be certified by the NDIS. 

Also, make sure you are buying in an area where this type of accommodation is in high demand. It could be an area with a low supply of NDIS-compliant properties or an area with a high concentration of NDIS participants. 

Additionally, you should consider the challenges tenants in that area face in finding suitable accommodations. You can ensure that your property meets the individual needs of each tenant by taking the time to assess their specific needs.

As an example, someone who has a physical disability may need wider doorways and hallways to accommodate a wheelchair, while someone with a cognitive impairment may benefit from clear signage and well-lit rooms.

Since the industry is regulated, reviewed, and funded by the government, it needs to be monitored constantly for any changes that could impact the outcome.

As a result, you’ll have to invest more upfront than you would when building or renovating a standard investment property. In light of your circumstances and investment goals, you’ll have to take this into consideration when determining if this is a financially feasible investment.

2. SDA Properties Can Be Purchased in Several Ways

Investing in SDA properties involves modifying traditional properties to meet the necessary standards. Probably the most complex option out of the three, but there are contractors and architects that offer specialized services for modifying homes to meet SDA requirements.

SDA advisory organizations can also give you guidance on the way forward to ensure that you are taking the right steps. This may be a good option if you own an existing property in an area where NDIS properties are needed and have the funds to renovate or modify it. 

A second option is to purchase NDIS-approved SDA housing that is already built and equipped. For existing properties, you can use an SDA provider and a specialist real estate agent, but the supply is relatively low. Consequently, you may have difficulty finding the right property. 

The third option is to purchase a house and land package specifically designed for SDAs. In addition to being the easiest way to buy an SDA property, there is a need for newly built properties due to the low supply of NDIS housing.

3. SDA Standards Must Be Met By Each NDIS Property Investment

The NDIS SDA property programme provides safe and attractive housing options for people with disabilities. By ensuring that the accommodation is fit for purpose and meets residents’ specific needs, the SDA standards aim to improve resident liveability.

For example, SDA standards require that these properties be accessible and have enough space to accommodate wheelchair users, as well as features such as level entryways, wide doorways, and accessible power outlets. All kitchen appliances must also be accessible regardless of whether the resident is seated or standing. 

Furthermore, SDA standards require properties to be more robust than conventional properties, which reduces the likelihood of reactive maintenance. As a result, NDIS participants can be confident that their homes will not require significant repairs or replacements anytime soon. 

Last but not least, each dwelling must meet certification standards to enrol in the NDIS. Most of the requirements and obligations for SDA can be found in the NDIS (Specialist Disability Accommodation) Rules 2021 (SDA Rules).

4. National Disability Insurance Scheme participants receive funding, not property

In order to qualify for SDA funding, compliance with the NDIS is an important requirement, but it is not the only one. A NDIS participant who is willing to rent your property is required to receive SDA payments from NDIS service providers. No matter how compliant your property is, you won’t be able to receive any funding without a tenant.

As a result, the SDA funding helps cover the costs of care and support for people with disabilities, not to subsidise landlords who build specialized housing for disabled people. 

Essentially, securing a tenant for your SDA-compliant property is the same as securing a tenant for an ordinary investment property.

5. There are tax implications when you invest in the NDIS

You will be required to pay income tax on the rental income you generate from your NDIS tenants, just as you would on any other investment property. Moreover, you will be able to deduct depreciation, rental expenses, and mortgage interest as part of your investment property tax deductions. 

Compared to a traditional investment property, you may be able to claim higher depreciation deductions as building costs and plant and equipment requirements are higher. Make sure you get a tax depreciation schedule from a qualified quantity surveyor to maximize your tax deductions.

Key Takeaways

People with disabilities can receive support through the NDIS, a government initiative. In order to accomplish this, it provides funding for housing and care services. As a result, the market for NDIS-compliant properties has grown, which are built with people with disabilities in mind.

An excellent way to enter the property market for new investors is through SDA properties. By planning and researching carefully, they can lay a solid foundation for successful investing. As with any investment, you’ll need to keep an eye on your tax consequences. 

We can provide you with tax advice on how to structure your property ownership to minimise your tax liabilities.