This week’s Federal Budget also contained little in the way of funding for retirees and those looking to downsize – but there was one exception.
From 1 July 2021, provided the legislation passes Parliament, homeowners will no longer have to pay capital gains tax if they make a formal written granny flat arrangement with a family member.
The measures are designed to remove the tax liabilities that may prevent families from making formal agreements with older relatives (see the story further down about how the Government is also looking to make these agreements easier to make).
“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.
The Government expects the exemption to cover around 3.9 million Pensioners – it will not apply to commercial rent arrangements.
Older people want independence and control
It sounds like a great idea.
But will Mum or Dad be happy to take up residence in the backyard?
As we discussed recently, research by our sister company, DCM Research, of 2,000-plus people aged 60 and older on their needs in retirement showed they wanted independence and control over their lives.
While a granny flat arrangement may seem like an easy option, it doesn’t offer the same level of independence as living in a retirement community.
Family circumstances can also change which may require the selling of the home.
And while living close to family may be desirable, living ‘out back’ is not going to offer the same social engagement and activities as you would find in a village – which other research has shown is critical to living a longer and healthier life.
Sorry kids, we’ll take the village every time.
