Thinking about having your parent(s) live with you rather than having them move into residential aged care?
Social isolation and safety of your ageing parents can be a concern. As an alternative to living alone your parent(s) could live under the same roof or in a purpose-built accommodation in the backyard.
Family care can be an efficient way to provide support and companionship across multiple generations.
Types of granny flat arrangements
There are three main types of granny flat arrangements:
- A parent buying a property in their child’s name but keeping a right to live there for the rest of their life;
- A parent transferring ownership of their existing home to a child, or another trusted person, with the right to live there for the rest of their life;
- A parent selling their own home and using some of the proceeds to build a separate dwelling or extension on a property, or paying for renovations on a child’s property, and getting the right to live there for the rest of their life;
- A parent provides funds to their child in exchange for the right to live in the child’s home.
Centrelink supports granny flat arrangements for social security and aged care purposes, subject to certain conditions, and exempts the financial contribution by the older person from the usual Centrelink gifting rules.
What is a granny flat interest for Centrelink purposes?
A granny flat interest is an agreement where the parent(s) pay for the right to live in a specific home for life. The property must belong to someone else and it must be:
- All or part of a private residence;
- the parents’ principal home; and
- Not owned by the parent(s), their partner or a trust or company they control.
The granny flat interest may include:
- The same building as the owner of the home;
- A separate, self-contained building on someone else’s land.
The right only lasts a lifetime and does not form part of their estate when the parent(s) die.
We suggest you get financial and legal advice before you consider granny flat arrangements.
These arrangements are normally a family affair and it is “easier” to make it informal. However, it is strongly suggested that you have a formal arrangement in place to reinforce your agreement such as:
- Who maintains the property;
- Confirm the parents’ right to live in the home for life;
- How will the parent(s) be compensated if they want to give up their granny flat interest;
- Who provides care, does the shopping, cooking pays, for utilities, etc;
- What happens if your parents’ health deteriorates and the care needs change.
The existence of a formal agreement may also determine the capital gains tax treatment on the eventual sale of the property.
Whatever arrangement is put in place, it must be in the best interest of the parent(s) and the expectations of everyone involved aired and clearly understood.
This is a complicated area with the integration of legal, taxation and Centrelink implications. Call us today on 1300 127 284 and arrange an appointment to discuss how we can help you and your family.
Factual Advice Warning: Any information provided in this website is purely factual in nature and does not take into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion. This does not constitute financial product advice under the Corporations Act 2001 (Cth).