My parents plan to sell their house, give us a lump sum of money under 'granny interest arrangement' then come to live in our investment property. Here are my questions
1. Is this amount of money exempted from CGT?
2. Since the amount of money we'll receive is not enough to cover the interest they will pay us rent. Can we claim tax deductions like any other rental properties?
Many thanks
Hi @1199
Are your parents selling their property to you and they'd live in it or are you talking about them moving to a different property you own or plan to buy?
We need to understand your situation better.
An individual has an eligible granny flat interest if they have a right to occupy a property for life under a granny flat arrangement. Check out the link for further details.
Hi @1199
Are your parents selling their property to you and they'd live in it or are you talking about them moving to a different property you own or plan to buy?
We need to understand your situation better.
An individual has an eligible granny flat interest if they have a right to occupy a property for life under a granny flat arrangement. Check out the link for further details.
Thanks for the response.
My parents will sell their property, give us the money and arrange granny flat interest to live at our current house for life. We will move to another house. My question is can they pay us rent? What is the tax implication in this situation? I've seen some information which said if the arrangement is commercial in nature then we will have to pay CGT on the amount of money that we receive.
Can you please clarify because it's not all clear?
Thanks
Hi @1199
A granny flat arrangement mustn't be commercial in nature. If the holder of a granny flat interest is required to make payments (such as rent) at a market rate this would be considered a commercial arrangement. This will mean CGT can apply when you create the right to occupy your property for life.
Before entering into this arrangement, you may want to seek professional advice.
Hi,
We just wanted to make sure that we interpret the rules correctly. We understand the a granny flat interest arrangement is considered 'commercial' if the grannies are paying rent. However, the CGT part isn't clear. Is this the CGT that we'll have to pay on the amount of lump sum money we'll receive? Or is it something else?
I'm not sure where to get professional advice from because this arrangement is not that well known. My tax accountant doesn't seem to be aware of it.
Many thanks,
Hi @1199,
CGT is generally incurred when you dispose of your asset (receiving this lump sum is not disposing of your property). If the granny flat arrangement meets the conditions (detailed in the link), you won't have to pay CGT.
If the rent you receive only contributes towards ongoing household costs (such as electricity and water), the arrangement is a reimbursement of actual costs (ie. not commercial).
If the granny flat arrangement is commercial in nature, it is not exempt from CGT. For example, where the holder of a granny flat interest is required to make payments (such as rent) at a market rate.
If you are receiving market rate rent from your parents, you would declare the rental income and then you can claim rental deductions. Not necessarily the interest though! To be able to deduct interest expenses from your loan, you need to consider the borrowing purpose. If your home loan is for your main residence, it's private in nature.
21 May 2026 · 4 min read time
15 Apr 2026 · 8 min read time
463 views
5 replies