Granny flat cost

Your quotes, on one footing

Build costs are quotes, so this page prints no average to call a benchmark. Total your own figures for a cost per square metre you can hold two builders to, and check the size and site limits, read from the planning instrument itself.

Two rules the summaries get wrong

The size limit is 60m², not a percentage. Section 52(2)(c) of the Housing SEPP 2021 puts the secondary dwelling’s total floor area at no more than 60m², or a greater area only if another planning instrument covering that land allows one. The “greater of 60m² or 10% of the main house” that circulates widely is a rule from a different division of the same policy, and applying it to a granny flat will cost you a redesign.

The 450m² is a standard, not a locked door. It appears in section 53(2)(a), it applies to detached secondary dwellings, and it is non-discretionary — which in planning language means that meeting it prevents the council demanding something more onerous. The policy attaches a note to section 4.15(3) of the Environmental Planning and Assessment Act confirming that consent can still be granted where the standard is not met. A 400m² block is a harder application, not an impossible one.

One rule is firmer. Build the flat through this Part of the SEPP — the secondary-dwellings Part these limits come from — and section 51 rules out consent to split that lot later. Built that way, the flat is value added to a single title.

The CGT exemption is federal — state duty is a separate question

Worth separating before you sign anything, because the two get conflated constantly. The granny flat arrangement exemption described below is a Commonwealth capital gains tax measure administered by the ATO. It says nothing about state transfer duty, which is charged under your own state’s Duties Act and decided by your revenue office.

Whether granting someone a right to occupy for life is a dutiable transaction where you live is a state question, and we have not verified it for any jurisdiction — so this page does not answer it. Ask your conveyancer or your state revenue office before the agreement is signed rather than after. Reading the ATO’s CGT exemption as meaning “no tax of any kind” is the mistake to avoid.

The rent has a capital gains tax price

This is a cost to weigh before you build. Once you let the flat commercially, part of your home is producing assessable income, so the main residence exemption no longer covers all of it and that portion is exposed to capital gains tax when you sell.

A granny flat arrangement is treated differently, but it is narrower than “housing a relative”. Since 1 July 2021 CGT does not apply when one is created, varied or terminated, provided the owners are individuals, the agreement is written and binding and gives the occupant a right to occupy for life, and the occupant holds an eligible granny flat interest — which means they have reached pension age, or need help with most day-to-day activities because of a disability expected to last at least 12 months. They need not be family. And the ATO’s own condition applies throughout: the arrangement must not be commercial in nature. Rent at a market rate makes it commercial; contributing only to household costs such as power and water is unlikely to.

The exemption covers creating, varying or ending the arrangement and nothing else. Selling the property later follows the ordinary CGT rules.

Neither outcome is a reason not to build. They are a reason to know which one you are choosing before the slab goes down.