Granny Flat Agreements

Protecting Your Family Before Circumstances Change

Helping a parent move in with family can seem straightforward. But when money, property and a lifetime right to live in a home are involved, a handshake agreement may leave everyone exposed. 

Why does a written agreement matter? 

A granny flat interest may arise when a person transfers money, assets or property in exchange for a lifetime right to live in a home they do not own. It does not have to involve a separate “granny flat”—it may be part of a family member’s home or another residence. 

Family arrangements can change 

Separation/divorce, death, financial hardship, refinancing, a property sale or the need for aged care can quickly test an informal arrangement. Without clear written terms, a parent’s accommodation rights and financial contribution may be difficult—and expensive—to prove. 

Centrelink and financial consequences 

Services Australia may recognise the arrangement as accommodation for life. However, if the contribution exceeds the value of the interest received, part may be treated as a gift and affect pension entitlements. The structure may also have capital gains tax, transfer duty, land tax and aged care implications. 

What should the agreement cover? 

A properly prepared agreement should clearly address: 

• The parties, property and contribution. 

• The resident’s lifetime occupation rights. 

• Rates, utilities, insurance, maintenance and repairs. 

• Sale, relocation, incapacity, aged care and death. 

• Exit, valuation, repayment and compensation. 

• How the arrangement interacts with wills and enduring powers of attorney. 

If an attorney is involved, the transaction must be authorised, in the principal’s best interests and properly managed for conflicts. Independent advice—and sometimes QCAT approval—may be required. 

Each party should obtain, or have the opportunity to obtain, independent legal and financial advice before money or property changes hands. 

The takeaway: A written granny flat agreement is not about mistrust. It is about protecting the parent’s housing and financial security, setting clear family expectations and providing a fair process if circumstances change. 

If your family is considering a granny flat arrangement, obtain advice and document the agreement before making the contribution—not after a dispute arises. 

Disclaimer: This article provides general information only and should not be relied upon as legal, financial or taxation advice. Specific advice should be obtained before entering into any granny flat arrangement.