Family can live in the flat two ways, and the paperwork decides which rules follow. As a tenant at market rent on an RTA general tenancy agreement, a relative is a tenant like any other: the rent is taxable income with deductions, the bond is lodged with the RTA, the minimum housing standards apply, and the owner loses part of the main residence exemption from capital gains tax. As a household member paying board toward the costs, the ATO treats the money as a domestic arrangement, not income, with no deductions and no loss of the exemption. A parent who pays for the build in return for a right to live there for life has a granny flat interest, which Services Australia assesses for the pension and which the ATO exempts from capital gains tax when it is written, binding and not commercial.
Tenant, or household member
| Tenant at market rent | Family member paying board | |
|---|---|---|
| Agreement | RTA general tenancy agreement if the flat is self-contained and the relative has no access to the house; rooming accommodation agreement if they share the kitchen | None required. A written note of what is paid and for what is still wise |
| Bond | At most four weeks' rent, lodged with the RTA within 10 days. A bond is not compulsory | None |
| Tax on the money | Assessable rent, with deductions for the rented part and capital works at 2.5% a year | A domestic arrangement: not income, no deductions |
| Capital gains tax on the house | Partial loss of the main residence exemption for the rented share and period | Full main residence exemption kept |
| Standards | Minimum housing standards, interconnected smoke alarms, entry condition report | Smoke alarm and building rules still apply to the dwelling |
| Ending it | The notice periods in the Residential Tenancies and Rooming Accommodation Act | Whatever the family agrees, with no tenancy law behind it |
Below-market rent to a relative is the muddy middle. The ATO's position is that a relative paying toward household costs is a domestic arrangement; charging something between board and market rent invites a question about which it is, and the deductions follow the answer. Pick one and document it.
A parent who pays for the build
When a parent puts money into a child's property, or transfers their home, in exchange for the right to live in the flat for life, Services Australia calls it a granny flat interest. It can be in any kind of property, including a separate self-contained building on someone else's land, and it is usually a family arrangement providing company and nearby help. Services Australia may accept one that is not in writing but recommends a legal document that confirms the right for life, says whether rent or upkeep is paid, and says how the owner compensates the parent if the arrangement ends. The value of the interest is assessed under the pension assets test, with a reasonableness test where the amount paid is more than the right is worth, and Services Australia asks to be called before the interest is created.
The ATO's side is the exemption: from 1 July 2021 creating, varying or ending a granny flat arrangement does not trigger capital gains tax, provided the owners are individuals, the parent has an eligible interest and the arrangement is written, binding and not commercial. The ATO's own example is a parent paying $500,000 toward an attached flat on a daughter's property. Tax covers the rest.
What stays the same either way
- The approvals. The RTA's own page says the owner must have the development, building and council approvals before renting the secondary dwelling, family or not.
- The 2022 change. A secondary dwelling can be occupied by anyone, related or not, so the old family-only conditions do not apply to a new approval. Can I rent it to anyone?
- Smoke alarms and the building rules, which attach to the dwelling, not the tenancy.
- Insurance. Tell the insurer who is living there and on what basis.
See it for your block
Questions people ask next
Do I need a tenancy agreement to rent a granny flat to my daughter?
Only if she is a tenant paying rent. Then the RTA's general tenancy agreement applies to a self-contained flat, or a rooming accommodation agreement if she shares the kitchen. A family member paying board toward household costs is a domestic arrangement with no tenancy agreement required.
Is rent from a family member taxable?
Market rent is, with deductions. Board paid by a relative toward household costs is a domestic arrangement under the ATO's rules: not income, no deductions, and the main residence exemption from capital gains tax is kept.
What is a granny flat interest?
Services Australia's term for a right to live in someone else's property for life, bought with money or a transferred home. It is assessed under the pension assets test, and the ATO exempts a written, binding, non-commercial arrangement from capital gains tax.
- RTA, secondary dwellings (general tenancy or rooming accommodation, approvals first, what the agreement must include), read 16 October 2026
- RTA, rental bond (not compulsory, four weeks at most, lodged within 10 days), read October 2026
- RTA, minimum housing standards apply to all tenancies, read October 2026
- ATO, rental properties guide (payments from relatives as domestic arrangements), read October 2026
- ATO, using your home for rental or business (the main residence exemption), read 16 October 2026
- ATO, granny flat arrangements and CGT, read 16 October 2026
- Services Australia, granny flat interest (Age Pension), read 16 October 2026
- Queensland Government, secondary dwellings (occupied by anyone since 26 September 2022), read 16 October 2026