What You Need to Know About Granny Flats

Granny flats offer numerous benefits, such as providing space for parents to live independently near their adult children, facilitating grandparent-grandchild interactions, reducing social isolation, and offering age-friendly, cost-effective housing options. If you have, or are considering building a granny flat, here is a summary of what you need to know:

• In 2021, the federal government removed capital gains tax liability for granny flats, and the Victorian government eliminated the need for planning permits for granny flats under 60 square meters.

• From a pension and aged-care perspective, there are important considerations for granny flat arrangements:

• A granny flat can be in any home you don't own, including transferring your current home or building one in your child's name.

• The amount paid for the granny flat determines home ownership status for pension purposes and eligibility for rent assistance.

• If you pay more than the market value for a granny flat, you may be subject to a reasonableness test or suspicion of creating an arrangement for social security advantage.

• Entering into a granny flat arrangement can impact your ability to afford aged care, especially if you move into aged care within five years of creating the granny flat.

• Granny flats are complex, and it's essential to seek legal and financial advice to avoid potential negative consequences if things don't go as planned.

This is just a summary of an excellent article in the Sydney Morning Herald you can read in it’s entirety here. For advice from a tax accountant about how a granny flat might impact your finances, you can contact us.