Legal – financial advice
Legal advice and specialist financial advice go hand-in-hand:
Solicitors are not usually qualified to give financial advice. It is accordingly very important that family agreements and granny flat agreements be prepared by the solicitor in close consultation with a financial adviser.
There can be all sorts of financial implications, including Centrelink pension issues, but also other issues in relation to Centrelink asset tests, taxation and capital gains tax implications and stamp duty implications. Also, children who are providing care and who may give up employment to do so, often require appropriate financial advice.
On 1 July 2021 legislation to eliminate or ameliorate capital gains tax in granny flat situations became operative.
In some situations capital gains tax “events” occured (for both the “grannys” and those providing the accommodation) when property was transferred to create granny flat arrangements.
This was sometimes unintended and created a disincentive to people seeking to enter into these arrangements.
In summary the legislation provides that no capital gains tax will apply if:
- The agreement is in writing and is binding on the parties
- The agreement is not commercial in nature
- The agreement is between individuals (not corporate entities)
- The agreement sets out the circumstances in which it can be varied or terminated
- The person being given the granny flat interest is of pension age or requires assistance for day to day activities because of a disability
It is important to note that not all associated capital gains tax events will be exempted. For example, if shares are sold to pay for a granny flat interest, there may still be the normal capital gains tax on any capital gains on those sales. It is accordingly important to seek appropriate financial advice.
The link below is to a summary page about this topic on the ATO’s website: