What is a Granny Flat Agreement?

October 7, 2020

Granny Flats are becoming an increasingly popular alternative to accommodate elderly loved ones, rather than enduring the overcrowding concerns and high costs associated with aged care providers and nursing homes. Have you always wanted to accommodate your ageing parents in a brand-new Granny Flat on your property, but cannot afford it? If so, you may be pleased to hear there is a way for your parents or elderly relatives to transfer assets or payment to you in exchange for the right to live in a Granny Flat on your property, without your elderly relatives having their Centrelink payments reduced.

Granny Flats are a great way to keep ageing parents or grandparents close for that extra level of supervision and care, so it’s beneficial to know about Granny Flat Agreements and how they work.


What is a Granny Flat Agreement?

Commonly referred to as a Granny Flat Interest, a Granny Flat Agreement is an agreement for accommodation for life. It is a family arrangement whereby ageing relatives (usually one or both parents) are provided with accommodation from one of their adult children in exchange for payment, without affecting that ageing family member’s social security entitlements. For social security purposes, sometimes the ageing parent will either transfer their home to their child or sell their home to pay for a Granny Flat to be built on their child’s land. In return for this payment, the ageing relative receives a lifetime right or exclusive use of the Granny Flat.

From a financial point of view, usually the transfer of property or funds would be considered a gift and would affect the elderly relative’s pension entitlements. However, the Granny Flat agreement rules allow this specific transfer of property or money paid to be exempt from the usual deeming legislation by Centrelink.

What are the requirements for a Granny Flat Agreement?

There are certain rules that need to be adhered to in order to enter into a Granny Flat Agreement, such as:

  • A Granny Flat Agreement can be created when the ageing relative exchanges assets for a right to live in someone’s (usually one of their children’s) property for life. The assets that can be transferred can be the ownership of the parent’s home, or some of their other assets such as cash, stocks or bonds for example.
  • The parent being provided with accommodation, their partner or a trust or company they control cannot own the property that relates to the new Granny Flat Agreement.
  • In order for a Granny Flat Agreement to be established, in exchange for payment or assets the ageing parent must be given the right of occupancy for life in a residential property that is to be the parent’s principle home.
  • Centrelink needs to be advised of what asset or payment the elderly relative or parent transferred in exchange for the right to live in the Granny Flat accommodation. In their evaluation, Centrelink will look at the value of the asset transferred to see if the ageing parent has paid a ‘reasonable amount’. If the parent has paid more than the Granny Flat interest is worth, then it may be determined that the parent has been depraved of an asset and this could directly affect the amount of pension they receive.

It is recommended to speak with a lawyer for more detailed information about Granny Flat Agreements.


Are you looking to build a Granny Flat for your parents on your property? Make your loved ones feel excited to move in, with a brand new, top-quality Granny Flat built by the best in the business. With over 25 years’ experience in NSW and the ACT, Cubitt’s are passionate about designing and building dream projects for our customers, at value-for-money prices. Unlike most other companies, we offer  custom Granny Flats designed to suit your individual needs and tastes, such as luxurious floor-to-ceiling windows, cathedral ceilings, upgraded cladding or brickwork to match your existing home. For those who love entertaining, you can add an extended alfresco area with outdoor fans, and expended pantry space in the full-size kitchen. We can even cater to specific lifestyle needs, such as adding wheelchair ramps and wider doorframes.

Go on, why not get some inspiration for your dream project by browsing our popular range of 1 bedroom Granny Flat models or 2 bedroom Granny Flat designs. For more information or to get started, call our award-winning customer service team on 1300 721 150.


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