Reverse Granny Flat Arrangement

 Author: RachelATO(Community Moderator)Community Moderator

20 Jan 2026

Hi @alarmguy,

No, there won't be any CGT involved in a reverse granny flat arrangement for your situation. From 1 July 2021, CGT doesn't apply when a granny flat arrangement is created, varied or terminated, as long as it meets specific requirements.

For your arrangement to be exempt from CGT, it needs to meet these conditions:

• the property owners (your parents) are individuals
• you have an eligible granny flat interest in the property
• you enter into a written and binding granny flat arrangement
• the arrangement isn't commercial in nature.

The arrangement must be in writing and indicate an intention that the parties are legally bound. Since you're only paying for the construction of the granny flat with no transfer of money to your parents, and you're contributing to property maintenance rather than paying market-rate rent, the arrangement isn't commercial in nature.

For your parents, CGT may arise later if they dispose of the property and the arrangement affects their main residence exemption.

You'll need to contact Services Australia to understand the Centrelink implications of the granny flat interest valuation. They assess those arrangements separately from the tax treatment.

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