A breakdown on Granny Flats and the Age Pension
Will I lose my pension?
While Granny Flats are no longer just for grannies, some of our clients do come to us at a stage of their life when they are receiving a part or full age pension.
Customers who are in this position often decide, along with their children or relatives, that a Granny Flat will bring benefits for everyone.
However, most customers in this position are concerned about how they can build a Granny Flat to live in, without losing some or all of their age pension payments. Our sales team are trained to give you clear general advice on this topic.
The good news
Most customers in this situation walk away with a solid plan to build a Granny Flat while keeping their age pension entitlements intact.
When you build a Granny Flat on your child’s property, or on the property of another relative or friend, you are entering into an agreement for them to allow you to live on that property for the rest of your life or until such time as you choose to no longer live there.
It’s wise to get a simple legal document in place to set the boundaries around this agreement. Again, our sales team are trained to point you in the direction of a reputable solicitor who can draw up such an agreement at a reasonable price – after all, we are mindful that you are managing on a pension!
When you build a Granny Flat on a property for which another person has the Title Deed, you are effectively “gifting” the cost of the Granny Flat to this person.
The laws about gifting in Australia are largely misunderstood and often thought to incur a tax. This is not essentially true. Tax on gifted amounts are triggered for the person RECEIVING the gifted amount if it significantly increases their annual income amount.
Fortunately, our prices mean the chances of the gifted amount inflating your child or relative’s income to a point at which it triggers a tax is remote.
More importantly, if you are already receiving an age pension, the gift amount given to build the Granny Flat will deplete, not increase, your assets so you have less chance of losing your pension payments.
Even if you are selling your current home, the combined amount of your earnings from the sale minus the Granny Flat build amount will leave you in a position to retain (or possibly increase) your pension amount.
As you will already know, everything related to the age pension is Centrelink related and must run through the proper processes to ensure that people aren’t abusing the age pension system. So be prepared to go through Centrelink’s “reasonableness” test which looks at the amount you are spending on your Granny Flat and therefore gifting to the ultimate owner of the Granny Flat on the property.
We’re here to help
With our team to guide you through these steps, we will have you building your Granny Flat in no time and living happily with family or friends, with financial strains behind you!
Talk to us about securing a stronger future today.
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The idea of building a Granny Flat is exciting and it can be easy to get carried away, however it’s important to carry out the appropriate research before getting started. Be sure to consult both your local council and state government laws, as these will vary depending on your area.
Looking for an investment, flexible accommodation or a future rental property? Granny Flats are a practical and cost-effective investment that can be designed to suit any use, whether you’re wanting a pool house, teenagers retreat or Airbnb.
Granny Flats are known as ‘secondary residences’ in the ACT and are required to comply with regulations that are slightly different to those in NSW, hence why it is so important to refer to your local and state laws in the planning stages.
At Cubitt’s, we get it – Cubitt’s understand your needs. With maximizing your property’s space whilst keeping family close such a hot topic, we wanted to give you a strong outline of why a Granny Flat is the perfect solution to plan for now. Now that we are in a lockdown, there has never been a better time to plan for your Granny Flat.
Try to purchase a block that is rectangle, with house to the front and plenty of rear garden. It is best if the house is square on the land not on an angle….it gives you more room for privacy from the house and the granny flat.
You may need to vacate your home while the extension is being built. All first floors, or areas beneath works need to be vacated during construction. Legally, no one is allowed to be beneath construction works during the construction hours of 7am to 4pm or until sheet flooring has been installed.