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9.2.6 Reasonableness Test

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This section demonstrates how the Reasonableness Test is used to determine how much of the amount contributed for the purchase or construction of a granny flat should be assessed as an entry contribution.

The amount considered to be an entry contribution is then assessed according to the Special Residence Basic Assessment Rules.


A granny flat interest exists if a person has established a right to accommodation for life, or a life interest in another person's private home.

Granny flat interests are established by the following methods:

  • transferring title of the pensioner's principal home to a relative and retaining a right of occupancy for life;
  • providing funds for the construction of a granny flat in which the pensioner has a right to reside for life on a relative's property;
  • providing some or all of the purchase price of a property which will usually be registered in a relative's name but in which the pensioner has a right to reside for life; or
  • the terms of an estate.

Refer to Section 5MA(2) of the VEA for the full definition.

 

 

An entry contribution is the amount paid or agreed to be paid by a person for the right to live in a:

  • retirement village; or
  • granny flat.

If a person lives in a home subject to a sale leaseback agreement, the entry contribution is the balance of the amount still to be paid by a buyer, at the date of a sale leaseback agreement.

According to subsection 5MC(2) of the VEA a special residence is:

  • a retirement village; or
  • a granny flat; or
  • a sale leaseback home.