Granny flats the big winner in Federal Budget’s senior housing measures

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Retirement villages could soon face more competition from an unlikely source.

The $25,000 ‘downsizers’ grant being pushed by the Retirement Living Council (RLC) and the land lease peak body, the Residential Land Lease Alliance failed to make an appearance in last week’s Budget.

However, the Federal Government has indicated more support for measures to help keep people living at home with capital gains tax for granny flats to be scrapped next year.

From July 1 2021, a homeowner will no longer have to pay capital gains tax where there is an agreement for older family members to reside in their home.

The measures are designed to remove the tax liabilities that may prevent families from making formal agreements with older relatives.

“When faced with a potentially significant CGT liability, families may opt for informal arrangements which can leave open the risk of financial abuse and exploitation, for example, following a family or relationship breakdown,” Treasurer Josh Frydenberg said.

While the exemption still has to pass Parliament, the Government says it expects the measures to cover around 3.9 million Pensioners – a considerable number of older people.

The exemption will not apply to commercial rent arrangements.

Without the ‘penalty’ of increased capital gains when a property is sold, the prospect of building a flat in the backyard to care for Mum or Dad suddenly appears much more attractive.

Granny flats have been a small but growing area of seniors’ housing in recent years as adult children look for ways to keep ageing parents out of residential care.

This could be the tipping point that sways the market in their favour.