Can I build a granny flat in my back yard?

by Urbane Property

Did you know that ‘granny flat’ is one of the top 10 real estate search terms on Google? Yes, you are not alone. More and more people are looking into the possibility of putting up a second dwelling, for all sorts of reasons. Here in the inner west, it is one example of how people are sharing resources and, as families turn back to the advantages of multi-generational living, it’s the ideal way to be close without being, well, too close!

It can also function as separate guest accommodation, a teenage retreat or a money spinner on Airbnb. In NSW, it’s permitted to rent out a granny flat for commercial gain. (This isn’t the case in Victoria and some other states, where rental is limited to dependents.)

While the Sydney granny flat building boom has been most apparent in the western suburbs or north shore, that doesn’t mean that you can’t put one up on a smaller footprint – over a garage is a common spot. If you want to gauge whether your house and/or yard are suitable, here are some questions to ask before you begin. 

Do you have a DA?

You might not need one. In 2009, the NSW Government released the Affordable Housing State Environment Planning Policy that permits residential home-owners with a block larger then 450m² (and a 12m street frontage) to build a granny flat as Complying Development. If your block is smaller than this, you will need Development Approval which you may well get, it just takes more time and effort.

Is there separate access?

This makes things a whole lot easier for construction (no traipsing every last nail through the house) and gives the would-be inhabitants some independence. A corner block or rear lane access is a great start to the project.

Are there any large trees?

If the tree is not a weed and/or exempt from protection under the Local Environment Plan, you will not be allowed to build within three metres of the canopy (the roots are assumed to be the same size). Check the regulations as the fines for taking down the wrong tree are up to $1.1million (yep, million).

Where are the services?

There’s a raft of regulations about building near or over pipes and easements. So if there’s a sewer main running across the bottom of your garden, it may thwart your plans or add many, many dollars to the cost of the build.

Is the block flat?

If you have a slight slope it’s not the end of the game but Councils generally require that drainage falls to the road. If it slopes back towards your house, there will be extra hoops to jump through, and associated costs of clever plumbing.

Are you planning to sell?

If you rent out your granny flat to someone other than a family member, this will affect your liability for capital gains tax (CGT) when you come to sell your home. This is worked out on a proportional basis – for example, if the granny flat takes up a fifth of your total square meterage, CGT will be payable on a fifth of the increase in the value of the home since the flat was built. This doesn’t have to be a deal breaker as you’ll also be able to claim deductions along the way, but best speak to your accountant for a full picture of the implications.

NOTE: The information here is of a general nature. Speak to your local council for details pertinent to your own project.


Interested in finding a new home for Granny? Check out our current listings here.


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