What you need to know about the granny flat tax reform

Are you receiving the Age Pension, and are considering moving in with a child or other carer in a granny

Are you receiving the Age Pension, and are 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 here).

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:

  • You provided $200,000 to build a granny flat at your son’s property that he already owns, but he loses his job and can’t pay the mortgage anymore?
  • You transferred your home to your daughter and son-in-law. They moved into the house and you moved into a self-contained flat. Now their marriage is in trouble, and it looks like the home will need to be sold as part of a divorce and property settlement?
  • You sold your house and gave $100,000 to your nephew, so you could live in an existing flat out the back of his house. As well as providing you somewhere to live, he also agreed to drive you to medical appointments and clean the bathrooms and kitchen in your flat. Now he has decided he doesn’t want to do any of this?

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.


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.

Originally published here

  1. No thanks…I might be elderly but I’m not dead…..why do some elderly think that once they are pension age it’s time to call it a day…..if you’re young you can still die, being older doesn’t mean an immediate death sentence….live and live well I say. As for living with the kids, why should they have their lives disrupted, they need to be able to enjoy their lives as well.

    • I could NOT live close to my son as much as I love him, still need that space. I would rather live my life the best way I can without becoming a burden.

    • My kids want me to live with them. Even my son in law. And they don’t have large houses. I learned a lot about family unselfishness overseas. Where I went, it was common for mum to move in with family when husband died. They supported one another.

    • I don’t think it’s about selfishness…..I taught my children to be independant as my mum did with me. My children would want me to live with them if I couldn’t cope but I still wouldn’t. I left the nest when I married and I won’t return to the nest of my children, that to me would be selfishness.

    • Sandra Page : I agree somewhat, but we have lost the art of family caring and communication with our elders. For centuries it was the norm to care for ageing parents. Not today. And we are living longer and healthier so we don’t feel the need to be on their doorstep when we get old and infirm (God help us) I want to go if that happens to me

    • yep …no pension for me as long as i can…..still work and aim to keep it that way til whenever……for me …loving your children …is showing them how you care for them from the time they are born until they decide its too hard to remain in the same house….i let them go….and the world is there oyster……..now they are grown with their own children and some of them have children ….just blessed to be here still and witness them …..whenever we get together inthe same country and same state….cuppa tea is a must …just to gather together and hug each other…..5 children 14 grandchilddren and 6 greats…….all alive living and healthey …we are blessed right now….and all those of work age are working ….and paying there way though society and doing volunteering work with others…….but hey thats our family…..and we do it our way…..not anybody elses….no pension and work live play go to church and care at the same time of others brings abundance of everything ….even $1 extra….

    • hubby and i looking at turning our 6 metre garden shed into our living quarters right now…..and the house left to one of the family not all……the rest will be advised and legal personnell be present in our family meeting…..hmmmmm…

    • Heni McGroder I wouldn’t fancy living in the garden shed. Also anyone can contest your will so make sure it is air tight.

    • I refuse to go to a nursing home if my brain cancer comes back…..been there done that. I know that two of my three sons will help out.

  2. What happens in the situation that you want to transfer a property into your daughters name ( she is already living in that property) I’m not in a pension and it’s not my own home it’s a place she lives in and helps pay the mortgage on

  3. It’s not something I would consider as there have been many stories on the TV which relate to this problem, I think a better option is RETIREMENT VILLAGES because you maintain your independence at all times.

    • No way! My in laws lived in one and had nothing but problems. Then when they wanted to get out there were so many rules and regulations about it.

    • Trish Daley.Some love retirement villages, some do not. Investment wise, they are not good, but if that is not a worry,it is an option.

    • Sorry Sue then they didn’t know what they were getting themselves in for, that’s why you get a good Solicitor.

    • Yvonne Jackson it is always WISE to have the contracts checked by a GOOD SOLICITOR, there certainly haven’t been any problems in this Village when it comes to resale. However you never sign any contract if you don’t know what you are getting into, Rules have changed a lot over the past 15-20 years so don’t believe everything you hear. I live in one and have done for 6 years and wouldn’t live anywhere else. If you have never lived in one then you shouldn’t comment on something you have no knowledge of.

    • It’s not for everyone but sometimes it’s a option to at least think about, personally I wouldn’t like it myself.

    • Trish Daley I totally agree about getting a solicitor to check out the contract. When my mum went into a nursing home she wanted my daughter to live in her house so that they could save for a deposit on their own. My mum had alziemers and died a couple of weeks after they moved in. I therefore drew up my own legal document between the beneficiaries of the will and my daughter that she would live there until we sold and also pay all her electricity rates etc. I felt awful doing it but needed that arrangement in writing for both the family and my daughter.

    • Trish Daley No,I have never lived in one. I am commenting only on friend’s experiences with them – re money invested in them. Most I know who live in them enjoy living in them. i do understand contracts – have a diploma in R.E. Practices and worked in R.E. for many years.

    • Yvonne Jackson then end of story, what you have heard is probably something that happened a long time ago. I suggest you do some serious research before you comment.

    • Trish Daley No. I have been looking at many for ourselves, since my husband had a series of strokes. Also have a number of friends who have recently bought into them. What i mean by not a good investment, is that you do not get the same amount of capital gain on a residence in a village, or at least your estate does not, as you would if you bought a house or unit. That does not worry some,but does others.

    • Cassie Edwards how long ago was that? Things have changed over the past 10-15 years, I also had a good friend of my mothers who lived in one and said after talking to her that I would never live in one. However they have changed significantly since those days believe me and for all he better, so don’t knock what you don’t understand, and you definitely DON’T understand you only think you do.

    • Yvonne if that is true and they are complaining which I very much doubt, then they never had their contracts checked by a SOLICITOR WHO DEALS IN VILLAGE CONTRACTS. And they give no one else to blame but themselves.

  4. I was just about to say that Trish Daley,God!!!!,mine would poison me,then youd all be watching me on telly again,without me getting paid!…lol

  5. My advice… keep your name on any property that you have financial ownership. Buy long term care insurance as well.

  6. Think twice…Nothing last for ever, any thing can happen and you’re find yourself out in the street.

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