The right only lasts for your lifetime. It's not part of your estate when you die.
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:
•.ownership of your home but keep a lifelong right to live there or in another private property
•.assets, including money, in return for a lifelong right to live in a property.
There are 2 ways to have a granny flat interest, either:
•.life tenancy – the right to live in the property
•.life interest – the right to use and benefit from the property as you wish.
With both kinds you need to be living there.
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:
•.confirm your right to live in the home for life
•.say if you've agreed to pay rent or look after any upkeep of the property
•.say how the owner will compensate you if they want you to give up your granny flat interest.
Before you create a granny flat interest, call us on your regular payment line. We'll discuss how it could affect your payments.
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:
•.transferring the title of your home and keeping a lifetime right to live there or in another property
•.paying to convert someone else's home to suit your needs and getting a lifetime right to live there
•.buying a property in someone else's name and getting a lifetime right to live there.
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.
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:
•.if the amount you paid is an asset
•.which assets test threshold applies before it affects your rate of payment
•.if you might be eligible for Rent Assistance.
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:
•.reasonableness test value of the granny flat interest, if you paid more than your reasonableness test amount
•.amount you paid for the granny flat interest, if you paid less than your reasonableness test amount.
If your entry contribution is more than the extra allowable amount, all of the following apply:
•.we assess you as a homeowner in the assets test
•.we don't include your entry contribution in the assets test
•.you can't get Rent Assistance, as you're a homeowner.
If your entry contribution is equal to or less than the extra allowable amount, all of the following apply:
•.we assess you as a non-homeowner in the assets test
•.we include your entry contribution in the assets test
•.you can get Rent Assistance, if you pay a high enough rent.
If you leave within 5 years, we'll review the granny flat interest.
•.something you could expect when you created the granny flat interest, the gifting rules will apply
•.something that was unexpected, the gifting rules may not apply.
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:
•.12 months
•.2 years if it's due to loss or damage to the property.
The owner can't take away your granny flat interest if this happens. They can do one of the following:
•.sell it but make your right to live there a condition of sale
•.transfer your granny flat interest to another property
•.give money or assets to you in return for giving up your granny flat interest.
Page last updated: 12 December 2018