A granny flat is a solution that is often turned to when an elderly parent is no longer able to live on their own without support, and a family member would like to look after them nearby.
Along with Rebecca Tetlow of DDCS Lawyers, I recently presented a paper on the treatment of granny flats to members of the ACT Law Society. Putting this paper together highlighted that there are quite a number of important considerations for both the elderly person and the person (often their son or daughter and their family) providing the accommodation. Some of the issues to be addressed are:
- What documentation have you put in place, to protect both the elderly parent, and their child?
- If the parent is providing any money to purchase or build a suitable flat, does it meet the requirements to not be treated as a straight gift for the purposes of calculating age pension entitlements?
- Will the parent/resident be assessed under homeowner or non-homeowner limits for their pension entitlements?
- If the child has received money for the construction and right to live in a granny flat, could they have a capital gains tax obligation? (Hint: the answer is potentially yes – so seek advice before acting).
All of the above are important to consider and sometimes the solution to one area (eg, Centrelink) can create a problem in another. The best step is usually to arrange a meeting with your financial planner and solicitor to explore the impacts from both angles. You may even be able to find similar solutions that meet the requirement to be able to provide care in a convenient manner.
If you’re considering how you can provide care and accommodation for an elderly relative, the best idea is to get the conversation started. You can call our office on (02) 6247 1233 if you’d like to book a no obligation appointment and we can explain how arrangements work in greater detail.
(image credit flickr user mattshomes)