Can I legally rent out my granny flat to gain a rental income?

Posted on May 20, 2022

You may be wondering if you have just purchased a property with a studio or granny flat if granny flat rentals are legal, can you rent out your new granny flat?

This firstly depends on the State you live in Australia, as legislation differs in each State.  We will go through this state by state at the end of this article to assist you with this research.

How do I make sure my granny flat rental is legal?

Secondly, you must make sure the granny flat or studio is compliant, has been approved for habitat by a certified accreditor. This means the construction is either DA approved by your local council, or holds a Compliant Development Certificate (CDC) from the builder who built the granny flat or studio. If you do not have either of these on hand it is advisable to check the dwelling is compliant by either touching base with your local council for advice or engaging the services of a local Accredited Building Certifier.

What does my granny flat need to make it a good property rental?

Thirdly, consider the logistics of renting out the granny flat. Does  the tenant have a parking space, or will there be enough street parking. To make it attractive to tenants consider their storage needs, add a cupboard or shed. For privacy do they have their own separate, convenient entry. Additional things to think of would be do they have a nice private outdoor area or fenced yard for a pet. You may like to read our article on How to make your rental attractive to tenants, or the reason to build pet friendly to help with your decisions around renting out your property.
Another important thing to think about is will you be supplying the white goods. This is often advisable as people renting granny flats are often looking for a temporary living solution or younger people starting out who have not accumulated these possessions. 

 How do I charge for water usage and utilities when renting out my granny flat rental property?

Finally, will you be including the utilities in the rent such as electricity, gas and water? Or is the granny flat separately metered. Your local electrician should be able to assist you with this and advise you which way to go. Another option is to have a a sub meter, which our electrician advised, ideal for use in locations where you would like to meter individual loads such as your granny flat. Then you can see the amount of usage and calculate this off your electricity bill. Then invoice the tenant for the amount. Some granny flat owners don’t go to the trouble of separately metering and just factor the expected usage into the rent. They even advertise for a single person rental price or a two person rental price to cover this additional usage.

As far as water goes one of our clients and a private owner of a granny flat shared their experience with us: They firstly installed all their plumbing in their new granny flat and the added a new junction to their existing water main (your plumber or builder’s tradesmen can quote this if it is not already installed), then Sydney water installed a 20mm, smaller than usual household, water meter. This has no ongoing cost and just an additional reading on your current Sydney Water bill, making it easy to pass on to the tenant for payment. Avoid installing a larger household meter as these will incur an ongoing service fee cost.

 What do I charge for my rental property? How do I decide the granny flat rental asking price?

Setting the rent it is advised to do some research. We can help with this if you are listing on our advertising portal grannyflatrental.com.au from past experience of listings leased in your area.

 Can I rent out my secondary dwelling, granny flat, for a rental income?

Below is the current legislation and links on the potential of renting out your granny flat state by state in Australia and a simple response.

NSW

Yes! NSW is the forerunner of the granny flat boom thanks to the NSW Affordable Rental Housing State Environmental Planning Policy update in 2009. A homeowner is permitted to build a secondary dwelling on their property if the land size is 450 sqm in size with a CDC. There are some exceptions to this when a DA is required, some examples are fire or flood prone areas, or battle-axe properties. Once built you can rent out to a tenant not just your granny! As far as BnB holiday accommodation and Short Stays you are required to have a STRA (Short Term Rental Accommodation) registration number displayed in the holiday or short stay home and be on the STRA register. Information is in the link below. The rules around these Short Stay Rentals are depicted by each local councils’ policies. Examples of these rules are how many days a year you can holiday let or short stay your granny flat.

https://www.planning.nsw.gov.au/Policy-and-Legislation/Under-review-and-new-Policy-and-Legislation/Short-term-rental-accommodation

Affordable Rental Housing State Environmental Planning Policy

WA

Yes, you can rent out your secondary dwelling or ancillary dwelling to a non household member. A granny flat can be built up to 70 square metres as per the Residential Design Codes. On larger blocks and rural areas, granny flats can be built up to 100 square metres in size.

Helpful Fact sheet on this https://www.housing.wa.gov.au/HousingDocuments/Ancillary_Dwellings_Fact_Sheet.pdf

TAS

Yes, you can rent to anyone in this state. The Granny Flat rules in Tasmania indicate the maximum size must be no more than 60sqm or 30% of the total area of the main dwelling (whichever is less). Holiday letting, short stays are also in demand if you are in a scenic travel destination. The Tasmanian government are so onboard with the growth of granny flats that as part of ‘The Sharing Economy’ they have added a grant to help house the Tasmanian population through encouraging the building of granny flats. Get on board and build - must apply by end June 2022.

https://www.premier.tas.gov.au/site_resources_2015/additional_releases/ancillary_dwellings_grants

VIC

No, you are not able to rent out to strangers! Must be a family member and through a Granny Flat Agreement (GFA, or deed of family arrangement). Article coming soon on What is a Granny Flat Agreement is - Like our facebook group to get notified www.facebook.com/grannyflatrental

Regarding BnBs and short stay or holiday renting check In with your local council requirement.

Again you need to contact your local council around BnBs and Short Stay accommodation business options.

SA

In this state it is illegal to rent out a granny flat to any one that is not a dependant. There are two types of ancillary dwellings ‘dependant buildings’ that can be up to 60sqm in size but have a max of one bedroom if necessary and these are to be used by a dependant of the family unit such as a granny or young adult. You can also lodge for a ‘secondary dwelling’ that can have two bedrooms but your plans cannot exceed 60m squared or 70 metres above floor area of the main home (whichever has less surface area). You cannot rent out these properties, they must be occupied by a household member. Again BnB short stay rental properties we would recommend you speak with your local council for approval.

QLD

No, in simple terms you cannot rent out your granny flat legally as it stands as a secondary dwelling. However, you can request to your local council for a material change of use of the property to enable you to lease it out to members other than family. If building a new granny flat in order to gain income and rent it out your granny flat construction needs to be DA approved for Dual Occupation. If you do not hold this DA then you will only be able to rent your secondary dwelling permanently to a family member known as ‘a member of your household’.

Around BnBs, each local council has their own rules and you will need to contact them to see if you are eligible to run a holiday letting or short stay granny flat rental business from your secondary or dual occupancy dwelling.

It is advisable to do your research with your local council on your DA building requirements as these will depend on your zoning, land size and the local neighbourhood plan.

Some helpful links in QLD granny flat growth areas:

Brisbane City Council hold regular ‘talk to a planner sessions’ worth enquiring about here https://www.brisbane.qld.gov.au/planning-and-building/planning-guidelines-and-tools/brisbane-city-plan-2014/talk-to-a-planner-sessions
Noosa fact sheets on secondary dwellings https://www.noosa.qld.gov.au/downloads/file/2367/fact-sheet-3-secondary-dwellings

https://www.sandybolton.com/secondary-dwellings-noosa-plan-2020-noosa-council-april-2021/

Gold Coast Fact Sheet on Secondary Dwellings https://www.goldcoast.qld.gov.au/Planning-building/Building-applications/Domestic-building-works/Dwellings

Sunshine Coast Fact Sheets on Development Planning https://www.sunshinecoast.qld.gov.au/Development/Planning-Documents/Sunshine-Coast-Planning-Scheme-2014/Planning-Scheme-Help

NT

Yes, you are allowed to rent out your granny flat to anyone. You must engage in a Registered Certifier for approval of the building prior renting it out. The below link sets out all the criteria.

https://nt.gov.au/property/land-planning-and-development/planning-professionals-and-applicants/building-an-independent-unit

ACT

A secondary dwelling in ACT is known as a ‘Secondary Residence’. You can rent it out to anyone but it must have an additional car space on your land for the resident of the granny flat. It can be anywhere up to 90sqm and you must be on a minimum block size of 500sqm in a residential zone. There must be private outdoor space for the tenant to use. The property must be an urban sensitive water design (reduce water wastage through additions such as water tanks) and be adaptable housing, able to be inhabited in design by persons with disabilities.

Other helpful articles you may like to read about renting out your granny flat

How to list a property on Granny Flat Rental

Building a granny flat? What makes it attractive to tenants

If I rent out my granny-flat do I have to pay capital gains tax, CGT

Should I rent out my rental property furnished or unfurnished