Are you receiving the Age Pension, and considering moving in with a child or other carer in a granny flat arrangement?
You might have done a bit of research to find out how your pension will be affected if you were to transfer title of your home, or sell the home and contribute to the construction cost of a self-contained flat on your carer’s existing land. There are concessions that can ensure you are treated similarly to when you owned your own home (details at http://www.humanservices.gov.au/customer/enablers/assets/granny-flats).
It’s important though if you’re transferring ownership of your home, or selling it and contributing money towards the construction or purchase of a suitable property, that you protect your interests. After all, what would happen if:
This is why your lawyer will always advise you that when you’re transferring a significant asset like your home or sale proceeds, you should have a legally binding agreement that sets out the rights and responsibilities of both you and your carer and/or relative.
It’s terrific advice!
But there is a problem that many practitioners aren’t aware of – an anomaly in tax law means that if you have an agreement in place when you provide property or money, the carer potentially has a very large tax problem.
You see, the value of the property, or money received for construction of a flat, could actually be immediate taxable income for the person who has received it. That would mean if the carer had employment income of $80,000, and you gave them $100,000 – they would have to pay additional tax of $39,000 for that financial year.
Michael Miller of MLC Advice Canberra recognised this problem, and has established the website Granny Flat Reform to provide information and lobby for changes to tax laws to fix the problem.
What can you do?
A petition has been established which you can sign online to show your support for the changes here
If you want to know more about the issue you can check out more information at www.grannyfl.at.
Do you live in a granny flat? What is your arrangement? Would a reform to the tax law make life easier for you? Tell us below.