What is a Granny Flat Arrangement?

Granny flat arrangements are becoming more common as they respond to a mix of financial, social and lifestyle pressures facing Australian families.

One of the biggest drivers is housing affordability. As property prices rise, many older Australians are choosing to sell their homes and contribute funds to live with or near family, rather than purchasing another property outright.

These arrangements are also increasingly attractive from a retirement and aged care planning perspective. When structured correctly, a granny flat arrangement can provide long-term housing security, support independence, and help protect Centrelink entitlements, such as the Age Pension.

While commonly referred to as a Granny Flat Agreement, the scope of these arrangements is flexible and can be tailored to suit individual family circumstances.

A typical example is where an older family member sells their home and contributes funds to build a second dwelling on the property of an adult child, which the older person then occupies.

Without the correct legal structure, this contribution may be treated by Centrelink as a gift under the deeming rules, potentially affecting Centrelink entitlements.

To avoid this outcome, the arrangement must qualify as a Granny Flat Interest. This requires that:

• the older person has a legal right to occupy a residential property for life, and actually resides there; and
• the older person has made a payment or provided valuable consideration in exchange for that right.

If you are considering a Granny Flat Arrangement and want certainty, clarity and peace of mind, the Penmans team can help you structure the agreement correctly from the outset. We offer a fixed fee package for most Granny Flat Agreements.

You can read more about our services here.