Granny flat interests

Social security uses the term granny flat interest to assess living situations where money or assets have been transferred in exchange for a right to accommodation for life.

These are examples of a granny flat interest under the social security definition:

• Bobby transfers his $1.5m home to Angela for the right to live in the home for life.

• Hilda pays $750,000 to build a self-contained unit on Jasmin’s property. Hilda has a right to live there for life

• Alice buys a $1.2m home in Sarah’s name. Alice has a right to live there for

• Ethel transfers her $1.5m home & $100,000 to Simon for the right to live in the home for life

• Douglas pays $250,000 for a lifetime right to live in Roy’s existing home.

Elements of granny flat interests

These elements constitute a granny flat interest:

• Your client pays* for a life interest or right to accommodation for life, and

• That life interest or right is in a private residence that will be your client’s home.

*Payment could be the transfer of cash and/or other assets, or the transfer of the title of the client’s existing home.

If the client only transfers part of the title to another person or takes a part-ownership in the other person’s home, a granny flat interest has not been established. This is because the client retains legal title to the property and that ownership gives them the right to live in the property.

Importantly:

• A granny flat interest can be created at any age.

• There are no tests of family relationship, the granny flat interest is not restricted to transactions between parents and children.

• Co-habitation is not required; the client paying for the right to accommodation for life does not have to live in the same residence as the person creating the right.

• The right to lifetime accommodation does not have to be in the same home, it can be in any home owned by the other person.

• For social security purposes, the granny flat interest does not need to be in writing. It can be an informal, verbal arrangement. However, a written agreement may provide both parties with greater protection.

Considering a granny flat arrangement? These agreements can impact your finances, social security, and future plans. Chat with Bill to make sure it’s the right move for you.

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.

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Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 8 October 2024. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.