• Federal Budget 2020-2021

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

With the current capital gains tax implications acting as a hindrance to families looking to implement formal and legally enforceable granny flat arrangements, the Morrison Government will remove these impediments by introducing a capital gains tax (CGT) exemption.

The exemption will specifically apply to arrangements with older Australians or those with a disability and where a formal written arrangement is in place. The Government’s intention is that the introduction of formal and legally enforceable arrangements (without the potential tax consequences) will reduce the risk of financial abuse and exploitation of vulnerable Australians. 

The new measure, which is expected to be implemented as of 1 July 2021, will remove any potential CGT implications to formal granny flat arrangements which provide accommodation to older Australians or those with a disability.

BDO Comment

BDO agrees that financial abuse and exploitation of family members can occur when informal arrangements are entered into. Rather than have families face potential trade-offs between CGT implications and security for granny flat residents, BDO welcomes the government’s announcement as a compassionate and sensible policy.