Granny Flats Features, Granny Flats Features, Rights and InterestsRights and Interests

Granny Flats – features, rights and interestsGranny Flats – features, rights and interests Granny flat interestsGranny flat interests How we assess your granny flat interestHow we assess your granny flat interest The Reasonableness TestThe Reasonableness Test Leaving the home in which you have a grannyLeaving the home in which you have a granny

flat interestflat interest..

Granny Flats Features, Rights and InterestsGranny Flats Features, Rights and Interests

A granny flat right or interest is created when you pay for a A granny flat right or interest is created when you pay for a life interest or right to accommodation for life in a private life interest or right to accommodation for life in a private residence that is to be your principal home. Whether you residence that is to be your principal home. Whether you live alone, with the owner or in a separate self-contained live alone, with the owner or in a separate self-contained dwelling on someone else’s property, your home will meet dwelling on someone else’s property, your home will meet the granny flat requirements and can be assessed under the granny flat requirements and can be assessed under special rules if:special rules if:

It is all or part of a private residence It is all or part of a private residence It is not owned by you, your partner, or an entity (trust or It is not owned by you, your partner, or an entity (trust or

company) that you control, and company) that you control, and You have established a granny flat interest You have established a granny flat interest

Granny flat interestsGranny flat interests

You establish a granny flat interest when you exchange You establish a granny flat interest when you exchange assets or money for a right to reside in someone else’s assets or money for a right to reside in someone else’s property for as long as you live. For example:property for as long as you live. For example:

You transfer ownership of your home but retain a right You transfer ownership of your home but retain a right to live there (or in another private property) for the rest to live there (or in another private property) for the rest of your life, or of your life, or

You transfer assets, including money, for a right to live in You transfer assets, including money, for a right to live in a private property for the rest of your life a private property for the rest of your life

There are two ways to have a lifetime right to live in a There are two ways to have a lifetime right to live in a property that you do not own. A life tenancy just gives property that you do not own. A life tenancy just gives you the right to live in a property. A life interest gives you the right to live in a property. A life interest gives you the right to use and benefit from the property as you you the right to use and benefit from the property as you wish. Both methods meet the requirement of a granny wish. Both methods meet the requirement of a granny flat provided you are living there.flat provided you are living there.

Your life tenancy or interest cannot be revoked because the Your life tenancy or interest cannot be revoked because the owner wishes to sell the property. They may :owner wishes to sell the property. They may :

Sell the property with your life tenancy or interest as a Sell the property with your life tenancy or interest as a condition of sale, condition of sale,

Transfer your life tenancy or interest to another property, Transfer your life tenancy or interest to another property, or or

Compensate you financially for losing your granny flat Compensate you financially for losing your granny flat interest interest

Your right only exists during your lifetime and is not part of Your right only exists during your lifetime and is not part of your estate.your estate.

We recommend you have a legal document drawn up by a We recommend you have a legal document drawn up by a solicitor as evidence of a life tenancy or interest. This solicitor as evidence of a life tenancy or interest. This should help to prevent problems in the future if your should help to prevent problems in the future if your personal circumstances change. The document should personal circumstances change. The document should confirm you have security of tenure and state whether you confirm you have security of tenure and state whether you are liable for any upkeep of the property or payment of are liable for any upkeep of the property or payment of rent.rent.

You should contact us to see if any of these actions would You should contact us to see if any of these actions would affect your payments.affect your payments.

How we assess your granny flat interestHow we assess your granny flat interest

We need to know what you transferred to the We need to know what you transferred to the property owner in exchange for a granny flat right to property owner in exchange for a granny flat right to see if you paid too much (that is, whether you have see if you paid too much (that is, whether you have deprived yourself of assets) and assess whether you deprived yourself of assets) and assess whether you are a homeowner or a non-homeowner.are a homeowner or a non-homeowner. Because granny flats and granny flat interests are not Because granny flats and granny flat interests are not usually sold, we do not use a market value to assess usually sold, we do not use a market value to assess their worth. Instead your granny flat is said to be their worth. Instead your granny flat is said to be worth the value of the assets you transferred or paid worth the value of the assets you transferred or paid if :if : You transfer the title of the home you live in to You transfer the title of the home you live in to someone else and keep a lifetime right to live in that someone else and keep a lifetime right to live in that home or in another home (provided your home was or home or in another home (provided your home was or would have been totally exempt from the asset test) would have been totally exempt from the asset test)

You pay what it costs to build a granny flat on someone You pay what it costs to build a granny flat on someone else’s property, or convert someone else’s property to suit else’s property, or convert someone else’s property to suit your needs and establish a lifetime right to reside there, or your needs and establish a lifetime right to reside there, or

You buy a property in someone else’s name and establish a You buy a property in someone else’s name and establish a lifetime right to reside there lifetime right to reside there

If you transfer assets in addition to the above (including a If you transfer assets in addition to the above (including a home property, part of which would have been assessable) home property, part of which would have been assessable) we apply a test of reasonableness.we apply a test of reasonableness.

The The ReasonablenessReasonableness Test Test

The reasonableness test is the amount of the combined The reasonableness test is the amount of the combined partnered rate of annual pension (regardless of whether partnered rate of annual pension (regardless of whether you are single or partnered) multiplied by the age related you are single or partnered) multiplied by the age related factor. If you are partnered, the age of the younger partner factor. If you are partnered, the age of the younger partner is used.is used.

If the amount of money or value of your property If the amount of money or value of your property exchanged is more than the value of the granny flat exchanged is more than the value of the granny flat interest, the excess is considered to be a ‘deprived asset’. interest, the excess is considered to be a ‘deprived asset’. This could affect the amount of pension you are paid.This could affect the amount of pension you are paid.

For Example: Malcolm (who turns 84 next birthday) and For Example: Malcolm (who turns 84 next birthday) and Irene (who turns 77 next birthday) purchase a granny flat Irene (who turns 77 next birthday) purchase a granny flat right by transferring their $340,000 home plus $50,000 cash.right by transferring their $340,000 home plus $50,000 cash.

The value of the granny flat interest under the reasonable test The value of the granny flat interest under the reasonable test is $363,470.53 (being $31,688.80 x 11.47 age related factor).is $363,470.53 (being $31,688.80 x 11.47 age related factor).

As their granny flat purchase is greater than the value of the As their granny flat purchase is greater than the value of the granny flat interest under the reasonableness test, Malcolm granny flat interest under the reasonableness test, Malcolm and Irene have deprived themselves of $26,529 – that is and Irene have deprived themselves of $26,529 – that is $390,000 less $363,461(rounded).$390,000 less $363,461(rounded).

Even though you don’t own the property in which you have a Even though you don’t own the property in which you have a granny flat right, we may still assess you as a homeowner. granny flat right, we may still assess you as a homeowner. Your homeowner status determines:Your homeowner status determines:

If the amount you paid is considered an asset If the amount you paid is considered an asset Which asset test threshold is applied to your assets before Which asset test threshold is applied to your assets before

they affect your rate of payment, and they affect your rate of payment, and Whether you may be entitled to Rent Assistance Whether you may be entitled to Rent Assistance

A non-homeowner has a higher asset test threshold than a A non-homeowner has a higher asset test threshold than a homeowner. The difference between the thresholds is homeowner. The difference between the thresholds is called the ‘extra allowable amount’.called the ‘extra allowable amount’.

This amount is compared to your entry contribution. If you This amount is compared to your entry contribution. If you were not assessed under the reasonableness test, your were not assessed under the reasonableness test, your entry contribution is the amount you actually paid. If you entry contribution is the amount you actually paid. If you were assessed under the reasonableness test, your entry were assessed under the reasonableness test, your entry contribution is the value of the granny flat interest.contribution is the value of the granny flat interest.

This table shows how your entry contribution affects your This table shows how your entry contribution affects your entitlement:entitlement:

Leaving the home in which you have a grannyLeaving the home in which you have a granny flat interestflat interest..

If you stop living in the home within five years, we will review If you stop living in the home within five years, we will review the granny flat interest. If the reason for leaving could have the granny flat interest. If the reason for leaving could have been anticipated at the time the interest was created, then been anticipated at the time the interest was created, then deprivation rules will apply.deprivation rules will apply.

The deprivation rules apply for the time you permanently The deprivation rules apply for the time you permanently vacate the home until the end of the five year period from the vacate the home until the end of the five year period from the creation of the interest. The deprivation rules do not apply if creation of the interest. The deprivation rules do not apply if you are temporarily absent from your home for up to 12 you are temporarily absent from your home for up to 12 months. If your absence is due to loss or damage to your home, months. If your absence is due to loss or damage to your home, this period may be extended for up to two years.this period may be extended for up to two years.

If you move to another residence after five years, please ensure If you move to another residence after five years, please ensure you update your address details within 14 days of your changed you update your address details within 14 days of your changed circumstance.circumstance.

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