As an alternative to living in your own home you may want to consider a ‘Granny flat’ arrangement.
Granny flat rights are usually a formal or informal family arrangements where you transfer money, assets or the title of your home to a family member (or other person) and in exchange you receive the right to accommodation for life or a lifetime interest in a private accommodation.
The accommodation can be a self-contained unit attached to a private home or a right to use a bedroom and facilities within a private residence which then becomes your principal home.
For Centrelink/DVA purposes special rules apply where a legitimate granny flat right has been established. Special rules also apply to determine if you will be considered a homeowner or non-homeowner for assets test purposes.
The amount paid by you for a granny flat right is called an ‘entry contribution’. If this amount equals the cost of the accommodation or is assessed to be ‘reasonable’ then gifting does not apply.
Establishing a granny flat right
A granny flat right can be established in any of the following situations:
- You transfer the title of your home to another personal while retaining the right to live in that property for your lifetime. The property transfer must be registered.
- You pay for the construction of a granny flat on another person’s property (or for modifications to a property) and acquire the right to live there for life
- You provide some or all of the purchase price of a property which is registered an another person’s name and receive the right to live in the property for life
- You give money or assets to another personal and receive the right to live in a property owned by that person for life.
While this arrangement does not need to be in writing from a legal perspective it is recommended to formalise the granny flat right in order to protect all parties.
You should also review your estate planning when a granny flat right is established.
Centrelink will review the assessment if you move out of the grant flat within the first five years.
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