what is a granny flat agreement?

A granny flat agreement (also known as a family accommodation agreement) is a legal arrangement between family members where one party provides money or assets in exchange for a lifetime right to accommodation and potentially care.

Key aspects of a granny flat agreement:

1. Common Scenarios:

• Parent transfers money/property to child in exchange for living arrangements

• Parent builds accommodation on child's property

• Parent pays for home renovations/extension

  2. Legal Requirements:

• Must be a family relationship

• Must involve right to accommodation for life

• Agreement should be in writing (though verbal agreements exist)

• No formal rent payments involved

  3. Financial Considerations:

• Can affect pension eligibility if not structured correctly

• Centrelink has specific rules about granny flat arrangements

• Capital Gains Tax implications need consideration

• Important to get professional financial advice

  4. Important Protections:

• Should address what happens if circumstances change

• Need to consider estate planning implications

• Should cover care arrangements if relevant

• Protection in case of relationship breakdown

  5. Risks without formal agreement:

• Family disputes

• Loss of assets

• Pension complications

• Unclear rights and obligations

I'd recommend getting legal and financial advice before entering into a granny flat agreement as they can be complex arrangements with significant implications.