27 Feb

In recent years, the humble granny flat has undergone a transformation from a mere accessory to a principal feature with lucrative income-generating potential. Amidst escalating interest rates and the daunting challenge of meeting mortgage payments, homeowners are increasingly exploring the idea of investing in granny flats as a strategic addition or upgrade to their properties. Notably, this avenue presents a viable alternative for those who lack the capital for standalone secondary properties or townhouses yet, possess larger properties ripe for expansion.

A granny flat, also known as a secondary dwelling, can be either attached to, or detached from the principal dwelling. Beyond simply adding value to the property, these secondary units offer the enticing prospect of generating additional income for homeowners. Moreover, the depreciation deductions available for granny flats serve as an attractive financial incentive for investors.

In an effort to boost urban density, reduce urban sprawl, and address housing shortages, Western Australia has loosened regulations regarding the construction of granny flats in suburban backyards. In New South Wales (NSW), the Affordable Housing State Environmental Planning Policy (SEPP) streamlined the approval process for granny flats, allowing them to be approved as complying developments. This means homeowners can obtain a Complying Development Certificate (CDC) from a certifier or a reputable builder, saving both time and money.

While the prospect of a granny flat may be appealing, it’s imperative to navigate the regulatory landscape of each state and territory and to ensure compliance. In accordance with the National Construction Code (NCC), granny flats must include essential amenities such as a kitchen, a bath or shower, clothes washing facilities, and a toilet. Additionally, a fire-resistant wall is mandated to prevent the spread of fire between dwellings. The wall must have a Fire Resistance Level (FRL) of not less than 60/60/60, or a masonry wall no less than 90mm thick.

Further regulations state that the internal space should not exceed 60 square metres, the maximum height allowance is 8.5 meters and a courtyard space of 24 square metres is mandatory. Only one granny flat per lot is permitted, a setback of three metres from the rear of the main house is needed and 0.9 metres from side boundaries is essential, with three metres being maintained from existing trees taller than six metres.

As homeowners grapple with economic uncertainties and seek avenues to optimise their investments, granny flats emerge as a compelling solution. With careful consideration of regulatory requirements, compliance with construction standards, and a keen eye on tax benefits, integrating a granny flat into one’s property portfolio can prove to be a prudent financial move, enhancing both value and income potential.

Tax depreciation deductions can also be claimed if the granny flat is income producing. By leveraging these tax benefits, homeowners can maximise the return on their investment while bolstering their financial security. 

To gain further insights into how investors can effectively integrate depreciation into their investment strategies, reach out to BMT on 1300 728 726 or Request a Quote.