Are you contemplating moving your parents on to your property and potentially building a Granny Flat? One important topic to discuss in this situation, is if mum or dad own their property and sell it, this could affect their pension. If your parents gift you some of the proceeds of the sale of their property, this could also affect their pension.

There is an option available to help keep the pension and to also help gift money to children to help with the build of a Granny Flat.

Centrelink and DVA (Department of Veterans Affairs) have what is known as a “Granny Flat Right or Agreement” which provides alternative options when gifting assets that Centrelink or DVA do not count e.g., house. This can provide individuals a number of options to stay out of residential aged care longer and to possibly gift money to help the family financially.

– Sell the parents’ home and gift some or all of the proceeds to the children, and as long as the children give you the “right” to live in their property that they own for the rest of the parent’s life, then this an alternative to the regular gifting rules.

There are many rules to abide by when completing a Granny Flat Right/Agreement and it is wise to proceed with advice from an expert in this area as you need to be aware of the rules and other implications such as:

• Reasonableness test
• Capital Gains tax
• Possible stamp duty
• Possible land tax
• Moving out of the granny flat arrangement within 5 years
• The amount you pay for your granny flat right

A Granny Flat Right/Agreement is a specialist area and must be done correctly to not affect individuals financially for the next 5 years. A solicitor and accountant maybe needed in some cases, but most importantly it is done with a pensions and aged care expert.