Granny flat right or interest
The term granny flat right or granny flat interest describes an agreement for accommodation for life - not a description of the type of dwelling you live in.
A granny flat right or interest is created when you pay for a life interest or right to use certain accommodation for life, and this life interest or right is in a private residence that is to be your principal home.
Homes that can be granny flats
A granny flat interest is usually a separate, self-contained building or living area attached to a home or property. Dual occupancy allows for the construction of a detached dwelling on the property where a residence already exists. However, a granny flat interest can be created in any kind of dwelling and not just those typically referred to as granny flats.
You cannot have a granny flat right or life interest in a property in which you have legal ownership.
We recognise that granny flat interests are usually family arrangements providing company and nearby help for older people. This is not required for a living arrangement to be considered a granny flat for social security purposes.
Whether you live alone, with the owner or in a separate self-contained dwelling on someone else’s property, your home will meet the granny flat interest definition and can be assessed under special rules if:
- it is all or part of any private residence
- it is not owned by you, your partner, or a trust or company that you control, and
- you have established a granny flat interest
Creating a granny flat interest
You establish a granny flat interest when you exchange assets or money for a right to live in someone else’s property for as long as you live. For example:
- you can transfer ownership of your home but retain a right to live there or in another private property for the rest of your life
- you can transfer assets, including money, for a right to live in a private property for the rest of your life
There are 2 ways to have a lifetime right to live in a property that you do not own:
- a life tenancy - this gives you the right to live in the property
- a life interest - this gives you the right to use and benefit from the property as you wish
Both ways meet the requirement of a granny flat right or interest, as long as you are living there.
Your granny flat right or interest cannot be revoked because the owner wishes to sell the property. They may:
- sell the property with your arrangement as a condition of sale
- transfer your life tenancy or interest to another property, or
- compensate you financially for losing your granny flat interest
Although we may accept that you have a granny flat interest, even if it is not in writing, we recommend that you have a legal document drawn up by a solicitor to have evidence of the arrangement. This can help to prevent problems in the future if your personal circumstances change. The document should:
- confirm you have security of tenure
- state whether you are liable for any upkeep of the property or payment of rent, and
- outline how you are to be compensated if the property owner cannot maintain your life interest
A granny flat right or interest only exists during your lifetime and is not part of your estate.
You should contact us to see if any of these actions would reduce your payments.
How we assess your granny flat interest
We need to know the value of what you transferred to the property owner in exchange for a granny flat right or interest. We use this to work out if you have deprived yourself of assets by paying too much and assess whether you are a home owner or a non-home owner.
We do not use market value to assess the worth of a granny flat interest. Instead, it is considered to be worth the value of the assets you transferred or paid if you:
- transfer the title of the home you live in to someone else and keep a lifetime right to live in that home or in another home - this applies if your home was or would have been totally exempt from the assets test
- pay the costs associated to build a granny flat on someone else’s property or the costs to convert someone else’s property to suit your needs and establish a lifetime right to live there
- buy a property in someone else’s name and establish a lifetime right to reside there
Provided you pay in one of these ways and do not transfer additional assets as well, no deprivation will occur.
If you transfer assets in addition to the above, we apply the reasonableness test. This includes the transfer of a home property, part of which would have been assessable.
The reasonableness test
If the amount you paid is more than the cost or value of the granny flat interest, the excess amount paid is considered to be a deprived asset. This could affect the amount of pension you are paid. The amount of deprivation applied can be reduced by the calculated value of the accommodation known as the reasonableness test. For more information please talk to one of our Financial Information Service Officers.
Read more about how to calculate the value of your accommodation using the reasonable value conversion factors test on the Department of Social Services website.
If you are assessed as a home owner
We may still consider you to be a home owner for assessment purposes even though you do not own the property in which you have your granny flat interest. Your home owner status determines:
- if the amount you paid is an asset
- which assets test threshold is applied before it affects your rate of payment, and
- if you might be entitled to Rent Assistance
A non-homeowner has a higher assets test threshold than a homeowner. The difference between the thresholds is called the extra allowable amount. This amount is compared to your entry contribution.
If you were not assessed under the reasonableness test, your entry contribution is the amount you actually paid.
If you were assessed under the reasonableness test, your entry contribution is:
- the value of the granny flat interest – if you were assessed as paying more than the reasonableness test amount, or
- the amount you actually paid – if you were assessed as paying less than your reasonableness test amount
How your entry contribution affects your entitlement
|Description||More than the extra allowable amount||Equal to or less than the extra allowable amount|
|Your entry contribution means you are considered as a homeowner||Yes - You will be assessed as a homeowner under the assets test||No - You will be assessed as a non-homeowner under the assets test|
|Your entry contribution is included in the assets test||No||Yes|
|You are eligible for Rent Assistance||No - As a homeowner you are not eligible for Rent Assistance||Yes - If the rent you pay is high enough to get Rent Assistance|
If you leave the home that you have a granny flat interest in
If you stop living in the home within 5 years, we will review the granny flat interest. If the reason for leaving could have been anticipated at the time the interest was created, deprivation rules also known as gifting will apply.
The deprivation rules will apply if you permanently leave the home for the remainder of the 5 years from the creation of the granny flat interest. They do not apply if you are temporarily absent from the home for up to 12 months. If you temporarily leave due to loss or damage to the home, this period may be extended for up to 2 years.
Read more about disposing of your granny flat and gifting.