If you are providing housing for life to people who have reached pension age, or require assistance due to a disability, you may be entitled to a full Capital Gains Tax (CGT) exemption.
An individual with a disability is eligible to hold a granny flat interest if they:
- 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 after the arrangement is made.
Generally, an individual who is eligible for the disability support pension would meet this requirement.
A granny flat arrangement can be entered into with any party, including family or friends.
To be eligible for the exemption, there must be a “granny flat arrangement,” which is a written agreement that gives an individual the right to occupy a property for their life.
This “granny flat arrangement” must:
- Be in writing.
- Include or indicate an intention that they parties are legally bound AND
- Must not be commercial in nature.
It should also include the following information:
- Who the parties are that are involved in the arrangement.
- Any circumstances in which the arrangement can be varied or terminated AND
- What happens with the arrangement if it is varied or terminated.
To be exempt from CGT, the owner/s of the property on which the granny flat is to be built must also be individuals.
Should you require further information on this exemption, or for any other capital gains questions, please do not hesitate to contact us.
