Guide to capital gains tax 2022

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CGT exemption for granny flat arrangements

From 1 July 2021 no CGT event arises to eligible individuals on certain granny flat arrangements if the arrangement satisfies the requirements of the provisions. A granny flat arrangement is a written agreement that gives an eligible person the right to occupy a property for life.

The CGT exemption will apply to the creation, variation or termination of a granny flat arrangement.

An arrangement is a granny flat arrangement if:

• the owner or owners of the property are individuals
• one or more eligible people have an eligible granny flat interest in the property
• the owners and the people with the granny flat interest enter into a written and binding granny flat arrangement . This arrangement must not be commercial in nature .

A granny flat interest is where an individual has a right to occupy a property for life under a granny flat arrangement. A granny flat interest can be held in any type of property, provided it is a dwelling. This includes the owner's main residence or a separate property. It is not restricted to what is commonly referred to as a 'granny flat'. The interest may be in part or all of the property.

A granny flat arrangement can be entered into between the property owner or owners and any eligible party (meaning family or friends). At the time the eligible party entered into the arrangement they must either:

• have reached pension age
• require assistance for day-to-day activities because of a disability.

For more information, see Granny flat arrangements and CGT .

ATO references:
NO NAT 4151