Centrelink’s ‘granny flat’ exceptions are designed to encourage people to stay out of supported care. They may, however, leave openings for financial detriment or abuse.
Assets transferred in return for a ‘right to accommodation for life’ can create ‘granny flat rights’ where the transfer of assets will not impact on pension entitlements. But Centrelink can apply a reasonableness test to the amount paid for a granny flat interest. If it is considered excessive, this may affect pension entitlement. See Centrelink FIS Fact Sheet on ‘Granny Flats’.
Each of the following scenarios can be considered ‘granny flat’ interests and so Centrelink may not alter pension entitlements for these arrangements.
- Bryan transfers title of his home to his son while retaining the right to live in it.
- Mira sells her home and pays for the construction of a bungalow on her daughter’s property.
- Anna provides $50,000 to her son when she moves in with him.
Trying to maximise their pension entitlements through Centrelink’s recognition of granny flat rights encouraged Mira and Anna (above) to live with their adult child.
If they later wish to move out because they are unhappy, unwell, or inadequately cared for:
- Can they get their money back?
- Can they claim a property interest?
- What are the tax and pension repercussions?
- If they move into aged care, what effect does this new arrangement have on aged care costs?
Placing a parent in a granny flat then into aged care just a few months later is a strategy that has been used to try to circumvent Centrelink asset assessment and avoid an accommodation bond, but it will not work if the need for care could have been anticipated.
These matters need to be considered before your client enters into these arrangements. For example, you could assist your client to draw up a family agreement (see Family agreements) that could provide evidence of a life interest to help access this granny flat exception.