Maybe the garden has become hard work, the stairs are taking their toll, or the cost of maintaining a large home just doesn’t make sense anymore.
Perhaps you’d feel better living a bit closer to family.
Building a granny flat out the back of your child’s house might be the answer.
And you’re not alone. More Australians are considering different housing options as they get older, with the total number of dwellings approved rising 5.3% over the last year.*
It can help you stay independent, keep family close and make everyday support easier.
But a granny flat interest agreement is more than moving in with family.
It can affect where you live, your Age Pension, future aged care costs, future access to capital from the property and family relationships.
Understanding these impacts before you make the move can help you avoid unexpected consequences down the track.
More than a granny flat in the backyard
When we talk about a ‘granny flat interest’, we don’t just mean a small unit in someone’s backyard.
It’s not a description of where you live, but the agreement you make for the right to live there.
You may create a granny flat interest agreement by giving money, assets or property to someone in exchange for the right to live in a property for the rest of your life.
This could be either paying to build or change a home, giving someone a lump sum, or transferring ownership of your home while keeping the right to live there.
Because you get somewhere to live in return, the transfer may be treated as part of an arrangement, rather than a gift.
We may still need to check whether the amount you transferred was reasonable. If some of it is treated as a gift, the gifting rules may affect your payment.
What you contribute can also affect whether we assess you as a homeowner or non-homeowner under the assets test for Age Pension.
So, it’s worth checking what the arrangement could mean for your payment and personal circumstances before you commit.
Do your homework
If you're putting money towards a granny flat arrangement while it's still being set up, it's worth checking what that could mean for your Age Pension.
Planning to build?
Check the planning and approval requirements in your state or territory before you get started.
Your local council can help you understand any zoning, setback or planning rules that may apply.
Just as importantly, make sure everyone is clear about what the arrangement involves.
Talk about things like which spaces are private, who pays the bills and maintenance, and whether help with meals, transport or personal care is part of the deal.
Then tackle the tricky questions. What happens if the homeowner needs to sell? What if a relationship breaks down, the family moves for work or the property is damaged? You should also consider estate planning.
Working through these scenarios early can save confusion later and help protect everyone involved.
Put the arrangement in writing and seek independent legal and financial advice to provide greater certainty for both sides.
Plan for the unexpected
Most families enter these arrangements with the best intentions. But circumstances can change.
If you leave the granny flat arrangement within 5 years, we may need to consider why it ended.
Depending on what happened, gifting rules may apply for the rest of that period. This could affect your Age Pension and how we look at your assets for aged care fees.
Some unexpected events may be treated differently, including serious illness, an unplanned move into aged care, a relationship breakdown, elder abuse or serious damage that makes the property unsafe to live in.
Keep the written agreement, proof of payments and records of any property work. These can make later conversations and assessments much simpler.
You can also use the aged care fee estimator on the My Aged Care website to give you an idea of what you might pay if you need residential care later.
A granny flat arrangement can mean more family dinners, grandchildren dropping in after school and support close at hand when life gets complicated, and a little planning now can help make sure those are the memories that last.
Before making any decisions, our free Financial Information Service can help you understand your options and what the arrangement may mean for your finances.
Call us on 132 300 and when asked why you’re calling, say ‘Financial Information Service’.
* Australian Bureau of Statistics, Building Approvals, Australia, May 2026 (seasonally adjusted data).