All About Granny Flats

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Do you have an elderly relative who is contemplating downsizing, or who needs to move to be closer to family?

Granny flats- also known as DPUs (Dependent Person’s Unit) are becoming a popular housing option in Australia.

Designed for one or two people, a granny flat is a self-contained dwelling, usually located on the grounds of a single-family home. Most are detached, but can also be self-contained accommodation within another dwelling.

Granny flats can be custom-built, pre-fabricated, transportable or flat-pack designs.

Regulations around granny flats vary from state to state and from council to council. All granny flats must comply with both the Building Code of Australia and any relevant Australian Standards.

Rental Arrangements and Tax Implications

In Victoria, a granny flat can only be rented to a person who is dependent on the people living in the main home on the block.  If you have built a granny flat on your block of land, the tax office treats it as an investment property.

You will need to pay income tax on any rent you receive from the person living there.

You should also engage a quantity surveyor to prepare a tax depreciation schedule when the granny flat is first built, in order to maximise your tax benefits as the owner of an investment property.

If you sell your home, part of the sale price will be subject to capital gains tax. Always get independent advice from a qualified tax accountant.

Is building a granny flat the same as building a house?

When designing a granny flat, think about who will be using it. Will it need ramps, railings or stairs? Will it need to be able to accommodate a wheelchair or other mobility device?

Access to sewerage, stormwater drains, easements and connection to utilities also need to be considered in the same way as when building a house.

Take privacy into account – consider a side access gate and leave enough space and greenery to create a decent amount of space between the granny flat and the main dwelling.

Most builders will deal with your local council on your behalf when it comes to the approval process. This can take six to eight months.

Construction of a granny can take a few weeks up to a few months, depending on the type of construction method and the size of the dwelling.

HHow much does it cost to build a granny flat?

Costs will vary depending on the type of structure you build – a dwelling built from scratch by a builder will cost more than a pre-fab structure, but kits can have a lot of add-on expenses not included in a basic quote.

When calculating the cost, factor in council fees, connection of utilities and any special design features you may need.  

On average, a one-bedroom granny flat will cost between $80,000 and $120,000. The total cost will depend on the materials and height of the dwelling, any extra plumbing required, the area built on, and any extra landscaping or accessibility features.

It’s a good idea to get a couple of quotes from different builders – make sure they are quoting on the same type of building and check the quote carefully if there are significant differences in cost.

The Home Inspection Hub is one of Melbourne’s most reputable and well-established residential inspection companies, having completed over 20,000 inspections across Melbourne, Geelong and Central Victoria.

We have a range of inspection types and services that can help you if you are building a granny flat, buying a property with an existing granny flat, or selling your home with this type of building on the block:

  • Pre-Purchase House Inspections
  • Pre-Purchase Building and Pest Inspections
  • Owner Builder Defects (137b) Reports (essential for your Section 32)
  • Tax Depreciation Schedules
  • Special Purpose and Renovation Inspections
  • New Home Construction Inspections (including Contract Review)

Our friendly sales and booking team are available 9am to 5pm, Monday to Friday.

Call 1300 071 283, email or request a free quote today.