The answer depends almost entirely on how the arrangement was set up in the first place. Centrelink has a specific set of rules for this, called a granny flat interest, and done properly it can protect both your pension and your money. Done on a handshake, it can go badly wrong.

What a granny flat interest actually is

Despite the name, it has nothing to do with the type of building. Services Australia describes a granny flat interest as paying for the right to live in a specific home for life, in a property that belongs to someone else. It can be a separate flat in the backyard, a room in your daughter’s house, or even the home you used to own.

To count, the home must be your principal home, and it can’t be owned by you, your partner, or a trust or company you control. The right lasts for your lifetime only and isn’t part of your estate when you die.

You usually create one in one of these ways:

• transferring ownership of your home to a family member but keeping a lifelong right to live there (or in another property)
• paying to build a granny flat on someone else’s property
• paying to convert someone else’s home to suit your needs
• buying a property in someone else’s name and keeping a right to live there for life
• handing over money or other assets in exchange for a lifelong right to live in their home

Services Australia sets all this out on its granny flat interest page for Age Pension, and it recommends getting financial and legal advice before you go ahead.

Homeowner or non-homeowner? That’s the big question

Once you’ve sold your house and moved into someone else’s, you might assume Centrelink now treats you as a renter. Not necessarily. How much you paid for the granny flat interest decides whether you’re assessed as a homeowner or a non-homeowner, and that affects which assets test limit applies to you and whether you can get Rent Assistance.

The test works like this. Non-homeowners get a higher assets test limit than homeowners. The gap between the two is called the extra allowable amount. Centrelink compares what you paid for the granny flat interest (your entry contribution) with that gap.

From 20 September 2026, the full-pension assets limit for a single homeowner is $333,000 and for a single non-homeowner it’s $600,000. For couples it’s $499,000 and $766,000 combined. So the extra allowable amount is $267,000 in both cases. These figures are reviewed regularly, so check the current numbers on the Age Pension assets test page.

In Margaret’s case, her $400,000 contribution is well above $267,000, so she’d be treated as a homeowner and the $400,000 wouldn’t count as an asset. That’s often a good outcome. It works a lot like the family home exemption we explained in our piece on the assets test and the family home.

The reasonableness test, and why paying too much can count as gifting

Here’s where it gets trickier. If you hand over more than your granny flat interest is “worth”, Centrelink can treat the extra as a gift. Gifts above the free area count as deprived assets for five years. The free area is $10,000 in a financial year and $30,000 over five financial years, per the Services Australia gifting rules.

To work out what an interest is worth, Centrelink uses the reasonableness test. It applies when you’ve transferred extra assets, or when you’ve paid a lump sum towards accommodation that already exists at someone else’s place, with no building or renovation involved.

The calculation, set out in the Department of Social Services Social Security Guide, multiplies the annual combined partnered pension rate (as at the date the interest is created) by an age-based conversion factor. The older you are, the lower the factor, because a life interest is worth less when you have fewer years left to use it. For couples, the younger partner’s age is used.

The good news: Centrelink says it won’t treat you as having paid too much if you’re transferring the title of your home and keeping a lifetime right to live there, paying to build a granny flat, paying to convert someone’s home for your needs, or buying a property in someone else’s name. In those cases the whole amount is generally accepted as the value of the interest. The reasonableness test bites mainly when cash changes hands for a room in an existing house.

If you’re anywhere near the line, talk to Services Australia’s free Financial Information Service before money moves. A financial planner can also run the reasonableness numbers for you.

Get it in writing. Really.

Centrelink may accept a granny flat interest that isn’t written down. But it recommends a legal document that confirms your right to live in the home for life, says whether you’ll pay rent or contribute to upkeep, and says how the owner will compensate you if they want you to give up the interest.

There’s a second, very practical reason to formalise it: tax. Since 1 July 2021, the ATO’s CGT exemption for granny flat arrangements means capital gains tax doesn’t apply when a granny flat arrangement is created, varied or terminated. Without it, your son or daughter could face a CGT bill simply for granting you the right to live in their property.

To qualify for the exemption:

• the property owners must be individuals (not a company or trust)
• the person with the granny flat interest must have reached Age Pension age, or need help with day-to-day activities because of a disability likely to last at least 12 months
• the arrangement must be in writing, show that the parties intend to be legally bound, and not be commercial in nature

The ATO suggests the agreement name all the parties, including everyone with an ownership interest, and spell out when it can be varied or ended and what happens if it is. The parties don’t have to be related. Note the exemption only covers the arrangement itself. If you sell shares to fund the build, that sale is taxed under normal rules.

Our view: paying a lawyer to draw up a proper agreement is cheap insurance compared with the six-figure sums usually involved, and it protects the adult children as much as the parent.

What happens if the family arrangement breaks down

This is the part nobody wants to think about, and it’s exactly the scenario in our opening example.

Services Australia reviews a granny flat interest if you leave within five years. If the reason you left was something you could have expected when you set it up, the gifting rules apply, which could leave part of your money counted as a deprived asset even though you no longer have it or the home. If the reason was unexpected, the gifting rules may not apply. Centrelink lists sudden illness, family relationship breakdown, elder abuse and property damage as examples of unexpected reasons.

You can also be away temporarily during those five years for up to 12 months, or up to two years if the property was lost or damaged.

If the owner sells, they can’t simply take your interest away. Centrelink says they can make your right to live there a condition of sale, transfer your interest to another property, or pay you money or assets in return for giving it up. That last option is where a written agreement matters most. Without one, you’re relying on goodwill at the exact moment goodwill is in short supply.

The ATO’s own examples show how a well-drafted agreement handles this: parents hand over $500,000 for a lifetime right to live in their daughter’s unit, and the agreement says the money is repaid if they have to leave because of ill health, a relationship breakdown, or a sale.

Informal family money arrangements that go sour are a well-known pathway to financial abuse. We cover the warning signs in our guide to elder financial abuse.

Is a granny flat right for you?

For many families it’s a genuinely good setup: company, help close by, and money that might otherwise sit in a house you can’t maintain. But it’s a big, hard-to-reverse decision. If you’re still weighing it up against other options, our comparison of retirement villages and ageing in place is a useful next read.

Before you sign anything, we’d suggest:

1. call Centrelink on your regular payment line and ask how the plan would be assessed
2. book a session with the Financial Information Service
3. get your own lawyer, separate from the family member’s, to draft or review the agreement
4. make sure an enduring power of attorney is in place and that you trust the person named

FAQ

Do I need a written agreement for Centrelink to recognise a granny flat interest?

Not always. Services Australia may accept an unwritten arrangement, but it recommends a legal document as proof of what was agreed. You’ll need a written, legally binding agreement to get the ATO’s CGT exemption.

Will I lose my pension if I give my house to my children and keep living there?

Not necessarily. Transferring your home’s title while keeping a lifetime right to live there is a recognised way to create a granny flat interest. Whether you’re assessed as a homeowner depends on the value of the interest compared with the extra allowable amount ($267,000 from 20 September 2026).

Can I get Rent Assistance in a granny flat?

Only if you’re assessed as a non-homeowner, which happens when your entry contribution is equal to or less than the extra allowable amount, and you pay enough rent to qualify.

What if I have to move into aged care within five years?

Centrelink will review the interest. If the move was something you could have expected when you set up the arrangement, the gifting rules apply. If it was unexpected, such as a sudden illness, they may not. Tell Centrelink as soon as your situation changes.

This article is general information only and isn’t legal, financial or tax advice. Pension rules and thresholds change regularly, so check the official Services Australia and ATO pages linked above and get advice about your own circumstances before acting.

The Home Equity Access Scheme (HEAS) is the government’s answer to that problem. It’s a loan from Services Australia, secured against your home, paid as a fortnightly top-up, a lump sum, or both. You don’t repay anything until you sell or die. It’s cheaper and more tightly controlled than a commercial reverse mortgage, but it isn’t free money, and the interest adds up faster than most people expect.

Who can get it

According to Services Australia, you must meet all of these:

• you or your partner are Age Pension age or older
• you get, or are eligible for, a qualifying pension (this includes people who qualify for the Age Pension but get nothing because their income or assets are too high)
• you or your partner own Australian real estate that can be used as security
• nobody on the title is bankrupt or under a personal insolvency agreement
• the property is insured for at least 90% of the value of the buildings

That second point surprises people. You don’t have to be on a pension to use HEAS. Self-funded retirees who would qualify for the Age Pension except for the means tests can borrow too.

The current interest rate

The rate is 3.95% a year, compounding every fortnight on the outstanding balance. The Minister for Social Services sets it, and Services Australia says it will tell borrowers if it changes. Check the HEAS interest rate page for the latest figure.

On top of interest, you repay any legal costs added to the loan.

How much you can get each fortnight

The key rule is 150%. Your combined pension plus HEAS loan payment can’t be more than 1.5 times the maximum pension rate (including supplements) each fortnight.

From 20 September 2026, the maximum Age Pension is $1,237.70 a fortnight for a single person and $1,866.00 combined for a couple. That gives these ceilings:

If you’re on a part pension, you can borrow more to bring the total up to the same ceiling. If you get no pension at all, you can borrow up to the full 150% as a loan. Pension rates change every March and September, so the dollar figures will move. The how much you can get page and the HEAS calculator have the current numbers.

There’s also an overall cap, the maximum loan amount. It’s based on your age (or your younger partner’s age) and the value of the property you offer as security. It rises as you get older. Once your balance hits it, payments stop, though interest keeps running.

Lump-sum advances

You can also take part of the loan as a lump sum. The rules, per the advance payments page:

• you can advance up to 50% of the annual maximum pension rate in any 26-fortnight period
• you can take that as one payment or two, but no more than two advances in 26 fortnights
• taking an advance reduces your fortnightly loan payments for the next 26 fortnights

Using Services Australia’s own worked examples on rates from 20 September 2026, that’s up to $16,090.10 for a single person and up to $12,129 for each member of a couple.

Two catches. The advance counts as a financial asset for pension purposes, so it’s deemed under the income test and assessed under the assets test. If you used your principal home as security, it’s exempt from the assets test for the first 90 days only. So if the money sits in your bank account, it can trim your pension. Spend it on what you took it for.

The no-negative-equity guarantee

HEAS loans carry a no-negative-equity guarantee. When the debt is settled, you or your estate won’t have to repay more than the market value of the property, less any other mortgages or legitimate claims. Services Australia’s example: a $250,000 debt on a house that sells for $200,000 means you repay $200,000.

The guarantee can be lost if you increase a mortgage or other encumbrance on the property, misrepresent your circumstances or commit fraud. Tell Services Australia early if you plan to sell or change a loan on the property. Details are on the repaying your loan page.

The real cost: compound interest

This is the bit glossy summaries skip. Because you’re not making repayments, interest is charged on interest, every fortnight, for as long as the loan runs.

Services Australia’s own example at 3.95%: someone takes $750 a fortnight for 10 years. They receive $195,000. The balance after 10 years is $239,269.71, so more than $44,000 is interest. In its 15-year example, $526,500 drawn becomes a debt of $718,810.81.

And the interest doesn’t stop when you stop drawing. If you hit your maximum loan amount at 80 and live to 95, the balance keeps growing for those 15 years. That money comes out of your estate, which can affect what’s left for your family, or what’s left for you if you later need to fund an aged care deposit.

When the borrower dies, Services Australia generally seeks repayment from the estate after 14 weeks. It may defer repayment if a surviving partner is Age Pension age and still living in the property, but interest keeps accruing.

HEAS versus a commercial reverse mortgage

Our honest take: if you want a steady top-up to your income, HEAS is usually the cheaper option and hard to beat. A commercial reverse mortgage mainly makes sense if you need a larger lump sum than the HEAS advance limits allow, say for major renovations or to pay out an existing mortgage. If you’re comparing, use ASIC’s Moneysmart reverse mortgage calculator. Lenders are required to take you through it before you sign.

Alternatives worth a look first

Before borrowing against the house, it’s worth checking whether you’re getting everything you’re already entitled to. Working a few hours? The Work Bonus lets you earn more without losing pension. Wondering why your part pension is lower than expected? Deeming rates might be the reason. And if the house is simply too big, selling and using the downsizer super contribution might suit you better than borrowing against it.

Services Australia’s Financial Information Service can walk you through the options for free, and it’s worth getting independent financial or legal advice before applying.

FAQ

Do I have to make repayments on a HEAS loan?

No. You can repay part or all of it at any time, but you don’t have to. The loan is usually repaid when the property is sold or from your estate.

Can I get HEAS if I don’t receive the Age Pension?

Yes, if you meet the rules for a qualifying pension but your rate is zero because of the income or assets test. You can then borrow up to 150% of the maximum pension rate each fortnight.

Will a HEAS lump sum reduce my pension?

It can. Advance payments are deemed under the income test and assessed under the assets test. If your principal home secures the loan, the advance is exempt from the assets test for the first 90 days only.

Can my children end up owing more than the house is worth?

No. The no-negative-equity guarantee means the debt can’t exceed the property’s market value, less other legitimate claims, unless you breach the conditions such as increasing another mortgage or misrepresenting your situation.

This article is general information only and isn’t financial or legal advice. Rates, payment limits and rules change, so check the Services Australia pages linked above and consider independent advice before applying.

Retirement villages and ageing in place are both good options. They suit different people, they cost money in very different ways, and the contracts involved are among the most complicated documents most people will ever sign. Here’s what to think about while you still have time to think.

Ageing in place: more possible than it used to be

Staying at home doesn’t have to mean managing alone. Government-funded help at home is arranged through My Aged Care. Since November 2025, ongoing in-home care has been delivered through the Support at Home program, which replaced the old Home Care Packages. An assessment works out what help you’re eligible for, from cleaning and gardening through to nursing, personal care and equipment. Support at Home also includes funding for home modifications such as grab rails and ramps.

The strengths are obvious. You keep your home, your neighbours, your routines and, for pension purposes, an exempt asset. The weaknesses are less obvious until you live with them:

• Wait times. Assessment and funding can take months, and the help you’re approved for may not match what you need on a bad week.
• Contributions. Under Support at Home, many people contribute towards the cost of their services depending on their income and assets.
• Isolation. This is the one people underestimate. A house that suited a family of five can become a very quiet place for one person who no longer drives.
• Maintenance. Gutters, gardens and broken hot water systems don’t stop because you’ve turned 80.

Retirement villages: buying a lifestyle, not a property

The single most important thing to understand about most retirement villages is that you usually aren’t buying real estate the way you bought your house. Many villages use a loan-licence or leasehold arrangement. You pay an “ingoing contribution” that gives you the right to live there, and when you leave, the village pays you back an exit entitlement under the terms of your contract.

That exit entitlement is where the real cost sits. Common features include:

• A deferred management fee (DMF). A percentage of the entry price or resale price that the operator keeps when you leave. It usually builds up year by year to a cap, often somewhere between 25 and 40 per cent.
• Capital gain sharing. Some contracts let you keep any increase in value. Others give the operator part or all of it.
• Refurbishment costs. Who pays to bring the unit up to standard before it’s resold varies from contract to contract.
• Ongoing fees. Weekly or monthly charges for maintenance, management and shared facilities, which can keep running for a period after you leave.

None of this is necessarily bad. A village with a pool, a bus, a library and people your own age just down the path is worth a lot to plenty of people. You just need to know what you’re paying for, and that it’s often paid on the way out rather than on the way in.

Ten questions to ask before you sign anything

1. Is this a loan-licence, leasehold, strata or rental arrangement?
2. What is the deferred management fee, how fast does it build up and what’s the cap?
3. Who keeps any capital gain when my unit is resold?
4. What will I pay each month, how have those fees changed over the last five years, and how long do they continue after I leave?
5. Who pays for refurbishment when I leave, and who decides what work is done?
6. How long will it take to receive my exit entitlement if the unit doesn’t sell? Several states now set a maximum time, so ask what applies here.
7. What happens if I need more care? Is there an aged care facility attached, and do residents get any priority?
8. Can my partner stay on if I move into care or die?
9. Is there a residents’ committee, and can I talk to some current residents without staff present?
10. How long is the cooling-off period, and what do I lose if I change my mind?

Don’t skip the independent advice

Retirement villages are regulated by state and territory laws, which differ on cooling-off periods, exit payments and disclosure. Most states also require operators to give you a disclosure statement before you sign. Read it, then have a solicitor who regularly deals with retirement village contracts look at it. The fee is small compared with the amounts involved.

It’s also worth checking how a move would affect your pension. In some cases, if your ingoing contribution is small enough, Centrelink treats you as a non-homeowner, which changes your assets test threshold and can make you eligible for Rent Assistance. Our explainer on the Age Pension assets test and the family home covers why that matters.

So which is better?

Neither, in general. Ageing in place suits people with good health, a manageable home and family or friends nearby. Villages suit people who value company, security and having someone else fix the gutters, and who are comfortable trading some of their eventual estate for that.

The worst choice is the one made in a hospital corridor after a fall. If you’re in your late 60s or 70s and still well, now is the time to visit a few villages, get a My Aged Care assessment if you’re eligible, and have an honest conversation with the people who’d help you either way.

FAQ

Do you own your unit in a retirement village?

Often not in the usual sense. Many villages use loan-licence or leasehold contracts, which give you the right to live there. Your money comes back to you as an exit entitlement when you leave, minus fees.

What is a deferred management fee?

It’s an amount the village operator keeps when you leave, usually a percentage of the entry or resale price. It builds up each year you live there, up to a cap set in your contract.

What help can I get to stay in my own home?

Government-funded in-home support, including cleaning, personal care, nursing and home modifications, is arranged through My Aged Care after an assessment. Ongoing care is delivered through the Support at Home program.

Is there a cooling-off period for retirement village contracts?

Yes, but its length and conditions depend on your state or territory. Ask the operator and your solicitor what applies before you sign.

This article is general information only. Retirement village rules vary by state, so get independent legal and financial advice before signing a contract.

The Changing Face of Retirement

The traditional concept of retirement has been undergoing a transformation. Many seniors no longer see retirement as a one-way ticket to leisure and solitude. Instead, they’re redefining their retirement years by seeking out active and social lifestyles. One way to do that is by sharing a home with others.

Financial Freedom

For many seniors, living on a fixed income can be challenging. High housing costs and property maintenance expenses can quickly eat into one’s savings. By opting for shared housing, seniors can significantly reduce their living expenses. Shared utilities, rent or mortgage payments, and other costs can make it easier to manage finances, ensuring that seniors can enjoy a more comfortable and secure retirement.

Embracing Companionship

One of the most significant advantages of living in a share house as a senior is the companionship it offers. Loneliness can be a prevalent issue for older adults, especially after the loss of a spouse. Sharing a home means there’s always someone to talk to, share meals with, and create lasting memories. The bonds formed with housemates can be just as strong as those in a traditional family.

Support Network

As we age, we may encounter health issues or require assistance with daily tasks. A shared living arrangement often results in a built-in support network. Housemates can look out for each other, whether it’s providing a ride to a doctor’s appointment, helping with household chores, or simply being there in times of need.

Sense of Community

Living in a share house often creates a sense of community that can be difficult to find elsewhere. Seniors in shared housing can host group activities, game nights, and other social gatherings. This sense of belonging can be invaluable, as it contributes to overall well-being and happiness.

Shared Responsibilities

A significant benefit of shared living is the division of responsibilities. Seniors no longer need to shoulder the entire burden of maintaining a home. Chores like cooking, cleaning, and yard work can be divided among housemates, making life easier and more enjoyable.

Choosing the Right Housemates

While shared housing can be a fantastic option for seniors, it’s crucial to choose the right housemates. Compatibility is key to ensuring a harmonious living situation. Before moving in with others, consider factors such as lifestyle, habits, and personal preferences. Communication is essential in establishing boundaries and understanding each other’s needs.

Respecting Privacy

One concern many seniors may have about shared housing is the loss of privacy. However, shared living arrangements can be structured to accommodate individual needs. Creating private spaces within the shared house and establishing clear boundaries can help seniors enjoy the best of both worlds: companionship and personal space.

Legal Considerations

Before entering a shared housing arrangement, it’s important to consider any legal implications. Seniors should consult with an attorney to address issues related to property ownership, rental agreements, and financial responsibilities. This ensures that all parties are protected and have a clear understanding of their rights and obligations.

Challenges and Solutions

While shared housing for seniors offers numerous benefits, it’s not without its challenges. Differences in lifestyle, habits, and personalities can sometimes lead to conflicts. However, open and honest communication can help resolve these issues. Additionally, it’s essential to have contingency plans in place for potential emergencies or changing health conditions.

Conclusion

Living in a share house over the age of 65 is an alternative retirement lifestyle that has grown in popularity for a variety of compelling reasons. Seniors who embrace shared living often experience financial relief, companionship, a sense of community, and a support network. While it may come with challenges, the rewards far outweigh the difficulties. Ultimately, shared housing allows seniors to age gracefully while remaining active, connected, and fulfilled during their golden years. So, if you’re considering this unique living arrangement, know that it can be a pathway to a happier and more enjoyable retirement.