Federal Government reviewing the tax treatment of granny flats

The Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of “granny flat” arrangements.

Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas.

This request for review is in response to the 2017 Australian Law Reform Commission’s report Elder abuse: a national legal response. Currently, homeowners may have to pay capital gains tax (CGT) where there is a formal agreement, for example, for an older parent to live with their child, either in the same dwelling or a separate granny flat. This may deter families from establishing a formal and legally enforceable agreement, leaving no protection of the rights of the older person if there is a breakdown in the informal agreement.

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