A parent in a second home on a child's block is the case the word granny flat was coined for, and the law has shaped itself around it more than around any other use. Services Australia recognises a granny flat interest, the right to live in someone else's home for life in exchange for money or a transferred house, and assesses it for the pension. The ATO exempts a written, binding, non-commercial granny flat arrangement from capital gains tax. The building rules since 14 August 2026 give small homes a lower energy target and keep step-free entry and an accessible bathroom in the Modern Homes Standards. And the council rules that keep a secondary dwelling within 10 or 20 m of the house, sharing its driveway, put the parent exactly where the arrangement wants them: close.
What the law gives this case
| Rule | What it does | Who sets it |
|---|---|---|
| Granny flat interest | A parent who pays for the build or transfers a home in return for a right to live there for life is assessed under the pension's assets test on that basis, with a reasonableness test where more is paid than the right is worth. Services Australia recommends a legal document and a call before the interest is created | Services Australia |
| Capital gains tax exemption | From 1 July 2021, creating, varying or ending a written, binding, non-commercial granny flat arrangement between individuals does not trigger CGT. The ATO's example is a parent paying $500,000 toward a flat on a daughter's property | ATO |
| Modern Homes Standards | Queensland's livable housing rules keep step-free entry and an accessible bathroom, with a 2026 ramp-ready option for an elevated home and more flexibility in bathroom layout. A home of 50 m² or less needs a 5 star energy rating instead of 7 | Queensland Government, QDC MP 4.1 and the Modern Homes Standards |
| Occupancy | A secondary dwelling may be occupied by anyone, related or not, so an approval no longer ties the home to one parent and the home keeps its use when circumstances change | Planning Regulation 2017 |
| Proximity | Within 20 m of the house in Brisbane, Logan, Scenic Rim and the Sunshine Coast, 10 m on the Gold Coast and in Moreton Bay, sharing the driveway and one extra car space | Each council's planning scheme |
Getting the paperwork right first
- A written granny flat arrangement before the money moves: the right for life, who pays what, what happens if the parent leaves or dies or the child sells. Services Australia and the ATO both ask for writing; a lawyer who does these takes an hour.
- A call to Services Australia on the parent's payment line before the interest is created, because the value of the interest and any excess paid is assessed and can change the pension.
- No market rent. Charging it makes the arrangement commercial and takes it out of the CGT exemption. Board toward costs is a domestic arrangement. Renting to family.
- The approvals as for any secondary dwelling: building approval, plumbing permit, and a planning application only where the council's scheme asks. Council approval, or building approval only?
Designing for the next twenty years
The standards give a floor; a parent's home wants more than the floor. Step-free from the car to the bed, a bathroom a walker fits in, doors 870 mm or wider, lever handles, a bedroom that takes a hospital bed if it comes to that, and a second bedroom or a sleep-out for a carer. A home at 45 to 60 m² does all of this in one module. Light and a view of the main house's back door matter more than a second living room.
This site's view
Most of the million homes this site is for will be lived in by someone's parent or someone's child. That is not sentiment; it is what the arrangements above were written for. A parent close by is care that no service delivers, a child close by is the same in reverse, and a second home on the block is the one housing form that gives both without anyone selling the family house. The council rules that keep the home near the house are usually read as a constraint. For this case they are the point.
See it for your block
Questions people ask next
Will a granny flat affect my parent's pension?
It can. A parent who pays for the build or transfers a home in return for a right to live there for life has a granny flat interest, which Services Australia assesses under the assets test, with a reasonableness test where more is paid than the right is worth. Call Services Australia before the interest is created.
Is there capital gains tax when a parent pays for a granny flat?
Not on the arrangement itself. From 1 July 2021 the ATO exempts creating, varying or ending a written, binding, non-commercial granny flat arrangement between individuals. A later sale of the property follows the normal rules.
What accessibility rules apply to a granny flat in Queensland?
The Modern Homes Standards in the Queensland Development Code: step-free entry, an accessible bathroom, and from 14 August 2026 a ramp-ready option for elevated homes and more flexible bathroom design. A home of 50 m² or less needs a 5 star energy rating.
- Services Australia, granny flat interest (Age Pension), read 16 October 2026
- ATO, granny flat arrangements and CGT, read 16 October 2026
- Queensland Government media statement, 3 August 2026 (Modern Homes Standards: 5 stars under 50 m², ramp-ready, accessible bathroom), read 16 October 2026
- QDC MP 4.1 Sustainable buildings, version from 14 August 2026, read October 2026
- Planning Regulation 2017, schedule 24 (secondary dwelling), read 16 October 2026
- The twelve council rules on this site, with the gap to the house per council, read 15 October 2026