Assistant Treasurer Stuart Robert says the Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of "granny flat" arrangements, and to recommend potential changes. This request for review is in response to the 2017 Australian Law Reform Commission's report Elder abuse: a national legal response, which identified the development of formal and legally enforceable family agreements as a measure to prevent elder abuse.
Under current tax laws, homeowners may have to pay CGT where there is a formal agreement for a family member to reside in their home – for example, when an older parent lives with their child, either in the same dwelling or a separately constructed dwelling (ie a granny flat). In some cases, the tax consequences have deterred families from establishing a formal and legally enforceable family agreement, which leaves no protection of the rights of the older person if there is a breakdown in the agreement.
The Board of Taxation's review will consider and make recommendations on the appropriate tax treatment of these arrangements, taking into account the interactions between the current tax laws and treatment of "granny flat interests" under the social security rules. In making the recommendations, the review will consider how any changes could raise awareness and provide incentives for older people and their families to enter formal and legally enforceable family arrangements.
The Board is expected to commence the review in early 2019, including broad consultation with stakeholders, with a final report due to the government in the second half of 2019.