Granny flat interest



A granny flat interest is an agreement for accommodation for life. It can affect your eligibility or rate of payment and we may include it in your assets test.

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What a granny flat interest is

A granny flat interest or right is where you pay for the right to live in a specific home for life. The property must belong to someone else. It's not a description of the type of property. We may also call it a granny flat right. It must be:

The right only lasts for your lifetime. It's not part of your estate when you die.

Which homes can have granny flat interests

You can have a granny flat interest in any kind of property. It doesn't just apply to properties often referred to as granny flats.

Granny flat interests are usually family arrangements providing company and nearby help for older people. They don't have to be for social security purposes.

The interest may include:

You can't have a granny flat interest in a property you legally own. This includes property that you, your partner or a trust or company you control owns.


Creating a granny flat interest



We recommend you get financial and legal advice before you create a granny flat interest.

You create a granny flat interest when you exchange assets, money or both for a right to live in someone's property for life.

For example, you could transfer:

There are 2 ways to have a granny flat interest, either:

With both kinds you need to be living there.


Proving your granny flat interest



We may accept that you have a granny flat interest even if it's not in writing. However, we recommend you get a legal document drawn up so there's proof of what you agreed to. This can help prevent problems later if things change.

The document should:

Before you create a granny flat interest, call us on your regular payment line. We'll discuss how it could affect your payments.

How we assess granny flat interests



How you create the interest will determine whether we consider you a homeowner. How you created it also determines whether we include the value of the interest in your assets test. These factors affect your eligibility for payments and how much you can get.

You need to tell us how much you transferred or paid to the owner for your granny flat interest. We use this to assess whether you're a homeowner. We also use this to see if you paid more than the granny flat interest is worth.

We use the amount you transferred or paid to the owner as the value of the granny flat interest.

We won't consider you to have paid more than the granny flat interest is worth if you're:

We use the reasonableness test to see if you've paid more than the interest is worth. We do this if you've transferred other assets as well. We also use it to work out whether or not you have deprived yourself of assets.

What deprived assets and the reasonableness test are

Another word for deprived assets is gifting. This is where you give away an asset without getting something of at least equal value in return. Read more about gifting.

If you pay more than the cost or value of your interest, the extra amount is a deprived asset.

To assess this, we subtract the value of your granny flat interest from the amount of the assets transferred. We work out the value of your granny flat interest by using the reasonableness test.

For more details contact our Financial Information Service. They can give you information about financial issues.

If you have a financial planner, they can use the Department of Social Services' reasonable value conversion factors test.

Assessing you as a homeowner



We may assess you as a homeowner, even though you don't own the property you have the granny flat interest in. This will depend on the value of the granny flat interest.

Your homeowner status determines:

Assessing the value of your interest

Non-homeowners have a higher assets test limit than homeowners. The difference between the 2 limits is the extra allowable amount. We compare this to your entry contribution.

Your entry contribution may be the amount you paid for the granny flat interest. If we assessed you under the reasonableness test, it will be either the:

If your entry contribution is more than the extra allowable amount, all of the following apply:

If your entry contribution is equal to or less than the extra allowable amount, all of the following apply:

What happens if you leave the property

If you leave within 5 years, we'll review the granny flat interest.

If the reason for leaving is:

Unexpected reasons may include sudden illness, family relationship breakdown, elder abuse or property damage.

You can be away from the property temporarily during the 5 years for periods up to either:

What happens if the property is sold

The owner can't take away your granny flat interest if this happens. They can do one of the following:

Page last updated: 12 December 2018

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