Granny Flat Rules in Australia: State-by-State Guide for 2026

Granny flats — also known as secondary dwellings, ancillary dwellings, or dependent person's units — have become one of the most popular property strategies in Australia. Whether you want to house a family member, generate rental income, or add value to your property, building a granny flat can be a smart investment. But the rules governing granny flats vary significantly between states, and getting it wrong can mean costly council disputes, fines, or an unapproved structure that cannot be rented out.

This guide covers the granny flat rules in every Australian state, the approval pathways available, typical costs, rental income potential, and the tax implications you need to understand before you build.

What Is a Granny Flat?

A granny flat is a self-contained secondary dwelling located on the same lot as an existing primary residence. It typically includes a bedroom, bathroom, kitchen, and living area. Granny flats can be:

• Detached: A separate structure in the backyard
• Attached: Built as an extension or conversion of part of the main house (e.g., a garage conversion)
• Above garage: A dwelling built on top of an existing or new garage

The key characteristic is that a granny flat is a secondary dwelling — it cannot be subdivided or sold separately from the main property under standard zoning rules (though some states are beginning to explore changes to this).

State-by-State Rules

New South Wales (NSW)

NSW has the most streamlined granny flat approval process in Australia, thanks to the Affordable Rental Housing SEPP (State Environmental Planning Policy):

• Maximum size: 60 square metres of floor area
• Approval pathway: Complying Development Certificate (CDC) — a fast-track approval that bypasses the full DA process, typically approved in 10-20 business days
• Minimum lot size: 450 square metres
• Setbacks: Minimum 3 metres from rear boundary, 0.9 metres from side boundary
• Rental: Legal to rent out to anyone (not restricted to family members)
• Heritage/flood zones: CDC not available in heritage conservation areas, flood-prone land, or bushfire-prone land — full DA required instead

NSW's CDC process makes it significantly faster and cheaper to get approval compared to a full Development Application (DA), which can take 3-6 months and cost more in council fees.

Victoria (VIC)

Victoria's rules for secondary dwellings (called Dependent Person's Units or DPUs) have historically been more restrictive:

• Occupancy restriction: DPUs are traditionally limited to a "dependent person" — typically a family member who relies on the occupant of the main dwelling for care
• No CDC pathway: Victoria does not have a fast-track CDC process for granny flats. A full planning permit is required in most cases
• Maximum size: Generally limited to a smaller footprint than NSW, though exact limits depend on the local council's planning scheme
• Rental: Renting a DPU to a non-family member is generally not permitted under the traditional DPU classification
• Reform: The Victorian government has been considering reforms to allow broader secondary dwelling construction, so check the latest planning scheme amendments

If you want to build a secondary dwelling in Victoria for rental income, you may need to apply for a different permit type — speak with your local council's planning department.

Queensland (QLD)

Queensland allows secondary dwellings under most residential zones, but rules vary by council:

• Maximum size: Typically 80 square metres (more generous than NSW), though some councils set lower limits
• Approval: May be code-assessable (faster) or impact-assessable (slower with neighbour notification) depending on the local planning scheme
• Minimum lot size: Varies by council — typically 600 square metres or more
• Rental: Generally permitted, but check your specific council's regulations
• Flood and bushfire overlays: Additional requirements apply in affected areas

Western Australia (WA)

• Maximum size: 70 square metres
• Minimum lot size: Typically 450 square metres (R-code dependent)
• Approval: Building permit required; may also need planning approval depending on the R-code zoning
• Occupancy: No family-member restriction in most areas

South Australia (SA)

• Terminology: Called a "dependent accommodation" or secondary dwelling
• Approval: Planning consent required under the Planning, Development and Infrastructure Act 2016
• Occupancy restrictions: May apply depending on the zone

Tasmania, ACT, and NT

Tasmania, the ACT, and the Northern Territory each have their own planning frameworks for secondary dwellings. In general:

• Planning approval is required in all three jurisdictions
• Size limits and setback requirements vary by zone and council
• The ACT's rules are particularly strict due to the leasehold land system

Council Approval vs Complying Development Certificate

Understanding the difference between a full DA and a CDC is critical:

• Complying Development Certificate (CDC): A fast-track approval for developments that meet pre-set standards. Assessed by a private certifier or council in 10-20 days. No neighbour notification required. Available mainly in NSW.
• Development Application (DA): A full council assessment that can take 40-90+ days. May require neighbour notification, assessment of environmental impacts, and council planner review. Required in most other states and in NSW for properties in heritage, flood, or bushfire zones.

A CDC is significantly cheaper and faster, but your property must meet all the complying development standards — lot size, setbacks, floor area, height limits, and zone requirements. If any standard is not met, you must go through the DA process.

How Much Does a Granny Flat Cost?

The cost of building a granny flat in Australia varies widely based on size, design, materials, and location:

• Basic kit or prefab (1-bedroom, ~35-40sqm): $100,000 - $130,000
• Mid-range custom build (2-bedroom, ~50-60sqm): $140,000 - $200,000
• High-end or architecturally designed: $200,000 - $250,000+

These figures include site preparation, council or certifier fees, connection to utilities (water, sewer, electricity), and basic landscaping. Additional costs may include:

• Demolishing existing structures: $5,000 - $15,000
• Difficult site access or sloping land: $10,000 - $30,000 extra
• Upgrading the sewer connection: $5,000 - $20,000
• Driveway or separate access: $3,000 - $10,000

Rental Income Potential

A well-designed granny flat in a good location can generate strong rental returns:

• Sydney (inner west/west): $400 - $550 per week
• Melbourne (middle suburbs): $300 - $450 per week
• Brisbane: $320 - $450 per week
• Regional centres: $250 - $380 per week

At $400 per week in rental income, a $160,000 granny flat generates a gross yield of approximately 13% on the construction cost alone — significantly higher than most other property investment strategies. However, the yield calculation should factor in the land value already tied up in the main property.

Impact on Property Value

A compliant, well-built granny flat typically adds value to a property, but the amount varies. In NSW, where granny flats can be freely rented, valuers often add $150,000 to $250,000 to the property valuation for a quality secondary dwelling. In states where rental restrictions apply, the value uplift may be lower.

Be aware that some buyers may see a granny flat as reducing usable yard space, particularly on smaller lots. Design and placement matter — a well-integrated granny flat enhances the property, while a poorly positioned one can detract from it.

CGT and Tax Implications

The tax treatment of granny flats changed significantly with reforms introduced from 1 July 2021:

• CGT exemption for family arrangements: A formal "granny flat interest" (the right to live in a granny flat) can now be created without triggering a Capital Gains Tax event, provided it is a written agreement between family members and the occupant is an eligible person (elderly or disabled)
• Rental income: If you rent out the granny flat, the rental income is assessable and must be declared in your tax return
• Deductions: You can claim depreciation on the granny flat construction, as well as ongoing expenses like repairs, insurance, and a proportional share of land tax
• Main residence exemption: The portion of the property used for the granny flat may be excluded from your main residence CGT exemption if it is income-producing. This means you could face a CGT liability on that portion when you sell
• Land tax: Some states treat a property with a rented granny flat differently for land tax purposes — check with your state revenue office

The CGT implications of granny flats are complex. Always consult a qualified tax accountant before proceeding — the cost of professional advice is far less than an unexpected tax bill.

Design Requirements to Consider

Beyond meeting minimum regulatory requirements, a well-designed granny flat should address:

• Privacy: Separate entrance, screening between main house and granny flat windows
• Parking: Some councils require an additional car space for the secondary dwelling
• Accessibility: Consider wider doorways and accessible bathroom design, especially if the intended occupant is elderly
• Natural light: Minimum window-to-floor ratios apply under the Building Code of Australia
• Ventilation and energy efficiency: BCA Section J energy efficiency requirements apply to granny flats just as they do to new homes

For more on building strategies, see our guide to building a new home. If you are building a granny flat as part of an investment strategy, our property investing guide covers how secondary dwellings fit into a broader portfolio approach.