“Granny Flat” Agreements

For older Australians, a ‘granny flat’ agreement can be an effective tool providing security without affecting pension entitlements.

There is increasing uncertainty about the treatment of the family home as part of Centrelink’s asset testing for pensions. Also, as people grow older the family home may longer be suitable accommodation. With appropriate financial and legal advice, the ‘granny flat interest’ rules can be useful in dealing with such assets, while at the same time ensuring that older Australians have proper accommodation and a reasonable alternative to commercial assisted living.

What is a granny flat interest?

A person has a granny flat right or interest if they paid the owner of their principal place of residence for the right to live there for the rest of their life.

A granny flat interest can be created in any type of dwelling – not just the self contained style of unit that term usually refers to.

The payment can take the form of the transfer of property (including the property the subject of the interest) or other assets.

Why are these type of arrangements useful?

These arrangements are most common in families with aging parents who have specific accommodation needs, but may not be ready for (or interested in) aged/retirement care living.

Generally, the parents will assist in the acquisition or renovation of a property by one of their children, in return for the right to live in that property.  Also common is the transfer of an existing property in return for a right to live in a child’s home.  Sometimes the arrangements include the provision of care and support for the elderly parents.

Provided these arrangements are properly documented and comply with Centrelink’s requirements, they will not affect pension entitlements, and the usual rules about gifting assets will not apply in relation to assets testing.

What should you do if you would like to enter a granny flat arrangement?

These types of arrangements can be complex and should be properly documented, and appropriate financial advice should be obtained.

The agreement itself should be properly drafted to ensure that they comply with Centrelink’s requirements.

Additional consideration must be given to how these arrangements can affect an estate plan, and in particular the potential for dissatisfaction by parties not affected by the arrangement.

Ballantyne Law Group is well suited to assist in advising on and preparing these types of arrangements.

Contact us today to discuss.

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Gold Coast lawyer James Ballantyne

James Ballantyne


Sidnee Jennings