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Why Granny Flats Are Becoming More Popular
There has been a noticeable increase in enquiries and sales of properties with “Granny Flats” or granny flat potential. It got me interested so I did a bit of investigating and it seems some government policy changes may well be driving interest. A lot of the Granny Flat Interest rules revolve around maintaining pension eligibility while transferring but not gifting some assets.
When we hear the term ‘granny flat’, we usually think of a self-contained unit attached to a private home. Often, this may be rented out or used by an elderly relative.
A “Granny Flat Interest” may be quite different to the ‘real estate’ description above.
When used in the context of social security, the term ‘granny flat right’ is used to assess living situations where money, assets or the title to one’s home have been transferred in exchange for a right to a lifetime accommodation in a private residence.
For example, you could transfer:
- ownership of your home but keep a lifelong right to live there or in another private property; or
- assets, including money, in return for a lifelong right to live in a home
You should check with Centrelink and a lawyer first before you get excited because the person obtaining the granny flat interest cannot have legal ownership of the property they live in.
Detailed information can be found here and a Google search also produced this article from TheSenior.
Homes that can be granny flats
You can have a granny flat interest in any kind of dwelling and not just those typically referred to as granny flats.
You cannot have a granny flat interest in a property in which you have legal ownership.
Granny flat interests are usually family arrangements providing company and nearby help for older people, but they don’t have to be for social security purposes.
Centerlink can count your home as a granny flat interest if:
- it’s all or part of a private residence
- you, your partner or a trust or company you control don’t own it
- you’ve created a granny flat interest
You can be living in:
- the same building as the owner of the home or
- a separate, self-contained building on someone else’s land
Life tenancy and life interest
There are 2 ways to have a granny flat interest:
- life tenancy – the right to live in the property
- life interest – the right to use and benefit from the property as you wish
With both kinds you need to be living there.
How Centrelink assess your granny flat interest
Centrelink need to know the value of what you transferred to the property owner in return for your granny flat interest. This is so they can assess whether they consider you to be a home owner or non-home owner, or if you have deprived yourself by paying too much.
The Centrelink website says they don’t use market value to work out how much a granny flat interest is worth. Instead they value it at the same value as the assets you transferred or paid if you are:
- transferring the title of the home you live in to someone else and keep a lifetime right to live in that home or in another home
- paying to:
- build a granny flat on someone else’s property
- convert someone else’s home to suit your needs and getting a lifetime right to live there, or
- buying a property in someone else’s name and get a lifetime right to live there
If you transfer other assets as well, they can assess them as deprived assets, or gifts.
by David Hamilton
Why Granny Flats Are Becoming More Popular
palmbeachfn.com.au February 2018 First National Palm Beach Corner of 6th Avenue & Cypress Terrace, Palm Beach, Queensland 4221
Phone: 07 5559 9600