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How are Granny Flat Rights Assessed by Centrelink and DVA?

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

Sometimes living alone may not be the best option and you may wish to move in with your children or another close relative/friend, or you may wish to reassign ownership of your home. The arrangements can be either formal or informal and you receive the right to accommodation for life.

This might involve you moving into someone else’s home or into a granny flat built on their property. Alternatively you can transfer ownership of your home to that person and continue to live in the home.

This arrangement may involve a gift of money, payment of expenses or transfer of the title of your home.

Normally the transfer of money or assets would come under Centrelink/Veterans’ Affairs (DVA) gifting rules. But the granny flat rules determine how this transfer is assessed and the interaction with gifting rules.

How are Granny Flat Rights Assessed by Centrelink/DVA?

You should discuss your individual circumstances with your local Centrelink/DVA office before taking any action to determine how you will be assessed.

If you pay money that equals the purchase or construction costs or you transfer full ownership of your home, this is deemed to be a ‘reasonable amount’. Gifting rules do not apply.

If transfer additional amounts Centrelink/DVA will determine the ‘reasonable amount’ for the granny flat right using a formula with a conversion factor (shown below) based on your age and the maximum rate of age pension (couple rate). Any amount paid or transferred over this reasonable amount is a gift and is assessed under deprivation rules.

Deprivation applies if the amount deemed to be a gift (single or couple combined) is more than:

  • $10,000 per financial year, or
  • $30,000 over a five year rolling period (includes current financial year and the four previous financial years)

Deprived assets are assessed against the income and assets tests for the next five years and may have a negative impact on your Centrelink/DVA entitlements.

If you move out of the granny flat within five years and the reason that you moved could have been anticipated at the time the right was established, gifting rules may be applied retrospectively.

Some details to be aware of include:

  • For Centrelink/DVA purposes, granny flat rights do not need to be written agreements however Centrelink/DVA may request a statement that the arrangement has begun
  • The amount paid or transferred for the granny flat right is an exempt asset (except deprived asset amounts) and you are assessed as a homeowner if the amount paid is above the extra allowable amount of $224,500 (2022/2023) If you pay $224,500 or less you are treated as a non-homeowner and the amount paid is an assessable asset
  • If you are transferring ownership of your home Centrelink/DVA may use the value accepted for stamp duty or may choose to receive a valuation from the Australian Valuation Office

If you have paid money for construction of the granny flat you need to provide a copy of the building contract to Centrelink/DVA to verify the construction cost

Other Things You Should Know

Granny flat arrangements may not work out. You may wish to formalise the arrangement to protect yourself by having a solicitor draw up an agreement and identify any other details. This agreement may include:

  • The quality and type of the accommodation to be provided
  • Whether the accommodation is in a particular property or in any property
  • How the granny flat right can be dissolved if the arrangement is no longer suitable

You should also ask your solicitor to review and formalise your estate planning arrangements such as your Will and Powers of Attorney.

The value of the granny flat can be a significant proportion of your estate so it is important to prevent potential rifts between family members. You may find it difficult to get your money back if you no longer want to live in the granny flat.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

General Advice Warning

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.


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