Board of Taxation reviews granny flat taxes

The Board of Taxation has commenced a review into the tax implications of granny flat arrangements.

The board has recently consulted with stakeholders from within the Government including the Department of Social Services, Department of Human Services and the Attorney-General's Department.

Consultations will continue throughout April as the board hears from legal aid lawyers and advocates who represent those suffering from elder abuse.

The consultation comes after the federal government requested that the Board of Taxation conduct a review late last year.

At the time, assistant treasurer Stuart Robert said: "The Government is committed to protecting the rights of older Australians."

"We have committed an additional $22 million over the next four years to increase front-line services to support those seeking help with elder abuse and we are working with State and Territory Attorneys-General to develop a national plan to respond to the abuse of older Australians."

Currently, homeowners may pay capital gains tax where there is a formal agreement for an elderly family member to reside in their home - either in the same home or in a separate granny flat.

The capital gains tax could be seen to create a deterrent to making these arrangements formal, which in turn may leave elderly people vulnerable if informal living agreements break down.

Informal granny flat arrangements are also favoured because they can attract gifting concessions where part or all of the value of an asset that an elderly person transfers to their child may be excluded from their income and assets when calculating their pension.

The government wants the review to incentivise families to create formal agreements, in order to lessen the vulnerability of elderly people living in granny flat type housing.

Formal and legally enforceable family agreements were identified as a measure to prevent elder abuse in the 2017 Australian Law Reform Commission's report 'Elder Abuse - A National Legal Response'.

The report found that current tax arrangements have been a deterrent, in some cases, to families establishing a formal and legally enforceable agreement and that failure to establish such an agreement leaves the elderly person without rights to their home.

Read more: Board of TaxationDepartment of Social ServicesAustralian Law Reform CommissionDepartment of Human ServicesNational Legal ResponseStuart Robert
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