If I rent out my granny flat do I have to pay Capital Gains Tax?

- The beauty of leasing out your granny flat is that the additional income will help pay off your home loan quicker, but there may be the potential of having to pay future tax on the financial gain of the property.

Although your main residence is exempt from Capital Gains Tax (CGT), if in the future you sell your house & you have been getting a rental income from a tenant in the granny flat, such as a formal rental payment from a tenant, you will potentially have to pay tax on a portion of the gain (the granny flat percentage to total area).

If however, you are leasing to a family member, such as a child whom you are helping out, by allowing them to live on your premise, or assisting your elderly parents, if an informal arrangement - with no formal written agreement in place, you will most likely not have to pay CGT.

Prior leasing out it it is advisable to speak to an accountant or your financial adviser to see if the yearly income will be worth the while and outweigh the potential tax charge in the future, if you are selling in the future. If you don't have a financial advisor we are more than happy to point you in the right direction. Let us know how you go please! Don't forget to list on www.grannyflatrental.com.au to find a tenant or come to us for a referral to one of our recommended real estate agents in your area, to help you. 

Please contact us if we can help further in any way or visit us on facebook @grannyflatrental

Disclaimer The information contained in blog.grannyflatrental.com is general information only and does not constitute property, legal, financial or compliance advice. We recommend you obtain your own legal council around landlord obligations and tenancy rights for holiday letting or leasing your property. Laws relating to tenancy agreements change regularly, and local council rules differ greatly around holiday letting. We recommend you check with the governing department in your State or Territory and local council around any legal disputes you may have with a tenant(s) or holidayer and their rights.