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Exit Strategies
Every granny flat arrangement will eventually end—whether through aged care needs, relationship changes, property sales, or simply the natural course of life. Planning for these scenarios before you commit protects everyone involved.
This guide covers the main exit scenarios you should plan for, and how to structure your arrangement to handle each one.
The Four Main Exit Scenarios
This is often the most complex exit scenario because of the interaction between granny flat rules, aged care means testing, and deprivation rules.
The Five-Year Rule
If you enter aged care within five years of creating your granny flat interest, and this was "reasonably foreseeable" at the time, Centrelink may treat your entire contribution as a deprived asset.
- You had a progressive condition like dementia already diagnosed
- Your health was declining and the family discussed aged care
- You needed significant care that was likely to increase
- Medical professionals had indicated aged care might be needed
If Aged Care Wasn't Foreseeable
If your need for aged care was unexpected—due to a sudden illness, accident, or unforeseen health decline—the full deprivation rules may not apply. However, your granny flat interest may still be assessed as an asset for aged care means testing.
What Happens to Your Granny Flat Interest?
Same Title Property
If your granny flat is on the same title as the main house (not subdivided), it may be exempt from aged care assessment if a "protected person" still lives there.
Protected persons include:
- Your spouse
- A close relative who has lived there 5+ years
- A carer who has lived there 2+ years
Separate Title/Strata
If the granny flat is on a separate title or strata lot, it's generally assessed as an asset regardless of who lives there.
This can mean:
- Higher means-tested care fees
- Potential requirement to pay Refundable Accommodation Deposit (RAD)
🔑 Key Planning Point
Your granny flat agreement should specify what happens if you enter aged care. Options include: the hosting family pays you out gradually, you retain an interest that reduces over time, or the property is sold and you're entitled to a proportion.
Relationships can break down in several ways that affect your granny flat arrangement:
Your Child's Divorce or Separation
If your child's marriage breaks down, your granny flat contribution could be treated as a matrimonial asset and divided in the property settlement—potentially leaving you with nothing.
Breakdown Between You and Your Child
Sometimes the relationship between parent and child deteriorates to the point where living together is untenable.
- Notice period required before you must leave
- What you're entitled to receive if you leave involuntarily
- Process for dispute resolution before it reaches this point
- Whether you can be "evicted" and under what circumstances
Your Child's Bankruptcy
If your child goes bankrupt, their creditors may be able to claim the property—including your granny flat interest.
Your child may need to sell the property for various reasons: job relocation, downsizing, financial pressure, or simply wanting a change. Your agreement should clearly address this.
Options to Include in Your Agreement
Property Sale Provisions
🔑 The Caveat's Role
A registered caveat on the property title prevents the property being sold without your knowledge and consent. Any buyer's solicitor will identify the caveat during due diligence, and the sale can't proceed until your interest is addressed.
You may simply decide the arrangement isn't working for you—perhaps the living situation isn't what you expected, or you want to move closer to other family or friends.
What Happens to Your Contribution?
This is where your granny flat agreement is crucial. Options include:
- Full refund: You receive your contribution back (requires the family to have or raise the funds)
- Pro-rata refund: You receive a portion based on how long you lived there (e.g., 80% if you leave after 2 years)
- No refund: Your contribution was for accommodation you received—leaving forfeits any further claim
- Hybrid approach: Different rules depending on why you're leaving (e.g., full refund if moving to aged care, partial if just choosing to leave)
Planning Your Exit Provisions
Before finalising your granny flat agreement, work through these questions with your family and solicitor:
For Each Scenario, Ask:
- What triggers this scenario? Define the specific circumstances (e.g., "entry to residential aged care for more than 28 consecutive days")
- What are you entitled to receive? A specific dollar amount, a percentage of contribution, a share of property value?
- When must payment be made? Immediately, within 6 months, when the property is sold?
- What if the family can't afford to pay? Can they pay in instalments? Do you have a charge over the property?
- Where will you live in the meantime? Who is responsible for alternative accommodation?
- How do you recover your contribution from a deceased estate? What priority does your claim have?
The Backup Plan
Regardless of your legal protections, it's wise to have a practical backup plan:
Your Safety Net Checklist
Getting Help in a Crisis
If you're already in a granny flat arrangement and things are going wrong, there are resources available:
- Elder abuse hotlines: Each state has services if you're being pressured, exploited, or abused
- Community legal centres: Free or low-cost legal advice for people who can't afford a private solicitor
- Aged Care Advocacy Services: If you're being pressured regarding aged care decisions
- Relationship mediation services: Before relationships break down completely
Need Help Planning Your Exit Strategy?
Proper exit planning protects you and your family if circumstances change.
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Last reviewed: 26 July 2026