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  • Supporting older Australians – exempting granny flat arrangements from capital gains tax

    In the 2020 Budget, the government announced they will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement.

    The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from 1 July after Royal Assent of the enabling legislation.

    Under the measure, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.

    A granny flat arrangement can be entered into with any party, including family or friends. However, this change will not apply to commercial rental arrangements.

    CGT consequences are an impediment to the creation of formal, written and legally enforceable granny flat arrangements.

    When faced with a potential CGT liability, families may opt for informal arrangements which can leave open the risk of financial abuse and exploitation, for example following a family or relationship breakdown. This measure will remove the CGT impediments, reducing the risk of abuse to vulnerable Australians.

    Legislation and supporting material

    The Government announcement in the 2020 Budget Paper No. 2 page 23External Link will take effect from 1 July after Royal Assent of the enabling legislation.

    More information:

      Last modified: 06 Jul 2021QC 64213