Granny flat CGT exemptions for older Australians

Effective 1 July 2021, Capital Gains Tax (CGT) will not apply to eligible granny flat arrangements.

The CGT exemption requires:

1. The owner/s of the property to be individuals;
2. Eligible person/s to have eligible granny flat interest/s in the property; and
3. A written and binding, non-commercial granny flat arrangement.

Eligible persons include older Australians, i.e. those who’ve reached pension age, and those with a disability, i.e. those who need assistance to carry out most day-to-day activities because of their disability and are likely to continue needing assistance because of their disability for at least 12 months of the arrangement is made. Individuals eligible for the disability support pension would generally meet the disability requirement. Granny flat arrangements typically exist between family members, but there is no requirement for the parties be related.

Granny flat interests give persons the right to occupy all or part of a private property, i.e. the same building as the owner of the home or a separate, self-contained building on someone else’s land.

The written and binding, non-commercial arrangements should include:

• the parties involved in the arrangement, including the individual(s) with an ownership interest in the property;
• the circumstances in which the arrangement can be varied or terminated;
• the consequences of variation and/or termination.

This exemption aims to:

1. increase an eligible person’s accessibility to suitable accommodation by reducing the tax consequences of property owners;
2. reduce financial abuse and exploitation by encouraging binding arrangements that protect the rights of vulnerable Australians.