The government has requested the Board of Taxation undertake the review in response to the 2017 Australian Law Reform Commission’s Report: Elder Abuse – a National Legal Response, which identified the development of formal and legally enforceable family agreements as a measure to prevent elder abuse.
“Under current tax laws, a homeowner may have to pay capital gains tax where there is a formal agreement for a family member to reside in their home – for example, when an older parent lives with their child either in the same dwelling or a separately constructed dwelling,” said assistant treasurer Stuart Robert.
“In some cases, the tax consequences have been a deterrent to families establishing a formal and legally enforceable family agreement, which leaves no protection of the rights of the older person if there is a breakdown in the agreement.”
The review will consider and make recommendations on the appropriate tax treatment of these arrangements, while considering the interactions between the current tax laws and treatment of ‘granny flat interests’ under the social security rules.
According to Mr Robert, the review will consider how any changes could raise awareness and provide incentives for older people and their families to enter formal and legally enforceable family arrangements.
The board is expected to commence the review in early 2019, including broad consultation with stakeholders, with a final report due to the government in the second half of 2019.