Granny flat provisions 108-06010040
Expand allGranny flat interest assessments - scenarios
Table 1: This table describes scenarios and assessment information for granny flats. Note: the rates used in these scenarios to determine the reasonable value may not reflect current rates. These scenarios are for guidance only and not meant to reflect a real customer's circumstances.
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Scenario |
Description |
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1 |
Title transferred to child to build units with customer living in 1 unit A customer wishes to transfer the title of their property, to their child. The property is a home on a large block. The child intends to build 3 units. One will be for the parent for as long as they live. The other 2 are to be rented out as investment properties. How is this assessed? Answer: The customer has a life interest in 1 of the units and has created a granny flat interest. Section 12A(2) of the Social Security Act 1991 states: A person has a granny flat interest in the person's principal home if:
The child's investment scheme as it relates to the 2 other units is not an issue for the customer. The child is the legal owner of the property. It does not matter that the customer will be living alone in the unit. |
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2 |
Sold principal home to purchase interest in property and to build granny flat A customer has sold their principal home. They use the proceeds to buy a one third interest in a property. They will build an extension to the existing house. This will be their 'granny flat'. The cost of the granny flat extension is less than the Extra Allowable Amount (EAA). Has the customer established a granny flat right? Is the customer a non-homeowner? Answer: The customer has not established a granny flat interest. The customer's right to live in the property stems from their legal ownership to a one third of the property. The customer is a homeowner. |
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3 |
Selling home, giving proceeds to children, and live in children's homes A 70 year old customer intends to sell their house and divide the proceeds between their 2 children. The customer intends to live at both their homes on an alternate basis for the rest of their life. They will live in Brisbane for 7 months and the other 5 summer months in Melbourne. The children will be paid $140 000 and $100 000 respectively. How will this affect the customer's pension payment? Answer: The customer has created a multiple granny flat interest. Services Australia must apply the reasonableness test. The reasonableness test amount is $277,208. The total amount the customer is gifting the children is $240,000. This is, less than the reasonableness test amount. There is no deprivation. |
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4 |
Sold home and dividing time between children, gave funds to each child A recently widowed customer aged 79, will sell their house to live with their 2 children. They will spend time equally with the children and pay them $100 000 each. How will this impact their age pension payment? Answer: The customer has created a multiple granny flat interest. Services Australia will apply the reasonableness test. The test amount is $178 389. The total amount gifted is $200 000. This is more than the test amount. If equal periods will be spent at each granny flat, the policy is:
As the customer has paid the same amount for each granny flat:
The deprived amount is half of the amount paid. This is $100,000. |
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5 |
Granny flat interest customer enters aged care Does the value of the granny flat interest affect their rate? Answer: If the customer's partner still lives in the granny flat interest, the customer remains a homeowner. There is no deprivation and no asset to assess. If the customer has terminated the granny flat interest, and the value of their original contribution has been returned, no deprivation has occurred. If the customer has terminated the granny flat interest, and the value of their original contribution has not been returned, deprivation may have occurred. This depends on if:
If the customer is a single homeowner and
If the customer is a single non-homeowner, and
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6 |
Customer with granny flat interest vacates within 5 years On 1 July 2017, the customer creates a granny flat interest by gifting their home property in return for a right to accommodation for life. On 1 July 2018, they vacate the property to move to a unit they have purchased. This was their original intention at the time they created the granny flat interest. The value of their original contribution was not returned when they moved to the unit. Deprivation applies from 1 July 2018 to 30 June 2022. Note: the 5 year deprivation period starts from the date the customer created the granny flat interest, but deprivation is only included in the customer's income test for the remainder of the 5 year deprivation period after the person vacates the granny flat. There is no deprivation and no asset to assess if the granny flat interest was created more than 5 years ago. |
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7 |
Customer transfers their home to a person and retains a granny flat interest in the home The customer has a right to occupation for life and has created a granny flat interest. If the value of the home transferred is:
The person who receives ownership of the property has a remainder interest. This is an exempt asset, as it was not created by them. |
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8 |
Customer supplies funds to another person to purchase a home, which is in the name of the other person The customer has a right to occupation for life and has created a granny flat interest. If the amount paid is:
The person who owns the property has:
If the person who owns the property is also a customer, this remainder interest is not an exempt asset if they are not living in the home. The remainder interest is valued by deducting the value of the right to occupy for life from the current market value of the property. If the owner of the remainder interest is likely to be impacted under the assets test staff should request:
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9 |
Provides funds to build a granny flat building on another person's property The customer has a right to live there for life and has created a granny flat interest. The customer who supplies the funds has a 100% beneficial interest in the 'granny flat' building and it is their principal home. If the customer pays:
The person who owns the property has no beneficial interest in this building. They are not assessed as owning the building as their asset. |
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10 |
Customer supplies funds to a person who already owns a home The customer has a right to live in the granny flat for life. If the amount paid is:
The person who owns the property has:
If the person who owns the property is also a customer and they do not live in it, this reversionary interest is not an exempt asset. The property must be valued as market value, less the value of the right to occupy. If the owner of the reversionary interest is likely to be impacted under the assets test staff should request:
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11 |
Giving cash to a family member who already owns and occupies their house A 95 year old customer transfers $260,000 cash to a family member for a granny flat interest. The value of the granny flat interest is the amount paid. This is unless the amount paid is greater than the reasonableness test amount. The reasonableness test amount is $114,573. Deprivation is the difference between:
The calculated deprivation amount is $145,427. They are considered non-homeowners, as the value of the granny flat interest is less than the EAA. The amount of $114,573 is recorded as an asset but no deemed income is assessed. |
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12 |
Transfer of property previously fully exempted under extended curtilage rules The customer has a right to occupancy for life and has created a granny flat interest. If the land considered as part of the principal home under the extended land use test, it should also be considered part of the transfer of the title of the principal home for the purposes of Granny flat provisions. The land greater than 2ha which satisfies the extended land use test forms part of the principal home for the purposes of the granny flat rules, and therefore not engage the reasonableness test. If the value of the granny flat interest is:
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13 |
Transfer of property under private land use rules The customer has a right to occupation for life and has created a granny flat interest. Determine the value of the granny flat interest. The value of the granny flat interest is the greater of:
If the value of the granny flat interest is:
Example: The customer has transferred their home situated on 50 hectares on one title to their son for a granny flat right. The whole property is worth $1.5 million. The value of the home and the surrounding 2 hectares is $800 000. The reasonableness test amount has been calculated at $747 916. The value of the granny flat interest is therefore $800 000 (because the value of the home and surrounding 2 hectares is greater than the reasonableness test amount). Deprivation is the difference between: The value of the whole property $1.5 million The value of the granny flat interest $800 000 The calculated deprivation amount is $700 000 They are considered homeowners as the value of the granny flat interest is greater than the EAA The new owner of the property has a remainder interest. If they are also a customer, this is an exempt asset as it was not created by them. |
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14 |
Customer pays to construct a detached granny flat and rents elsewhere during construction Customer sold their home for $200,000 after paying out their reverse mortgage. They plan to spend that amount building a detached granny flat on their daughter's property and are required to make 4 equal construction progress payments of $50,000 each. They are renting privately during the construction period. As the customer is renting, they are yet to receive the right to accommodation from their daughter. As such, any construction progress payments made are assessed as a gift. They may also be eligible for Rent Assistance. Once construction is complete and the customer moves in, the gift can be considered returned as the customer is now receiving the right to accommodation. Any gifts recorded that are related to the construction are to be end dated from the date customer moves in and the granny flat interest assessed. As the $200,000 'entry contribution' is below the Extra Allowable Amount, the customer is assessed as a non-homeowner and the entry contribution is recorded on the OAS screen. |
Example text for QSS32 questionnaire
Table 2
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Section |
Text |
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QSS32 Questionnaire template |
Manually issue a QSS32 Questionnaire To request further information from the customer to assist in making a decision about the assessment of the customers' granny flat interest. To create a QSS32 see: Select Free Text fields as required. Note: only insert questions that are applicable and adjust the text if necessary to suit the customer's circumstances. |
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Question A |
Free text Did you (and/or your partner) pay any money or transfer any assets in return for the right to accommodation in the granny flat for life? |
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Question B |
Free text If you did not pay any money or transfer assets, please describe how you obtained the right to accommodation for life? (for example, inheritance / formal agreement / informal arrangement) |
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Question C |
Free text Please provide the details of the person or organisation that was paid money or received a transfer of assets (Name, address and contact phone number). |
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Question D |
Free text What (if any) was the amount paid? |
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Question E |
Free text What (if any) assets were transferred and what was the market value of the assets? |
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Question F |
Free text Please provide all relevant supporting documents relating to the creation of the life interest in the granny flat (for example, written agreement / will / contract / transfer documents / bank statements). |