08 Mar

Council Amalgamations

On 12 May 2016 the NSW Government announced the formation of 19 new councils.

The proclamation of the new Bayside Council occurred on 9 September 2016, following the conclusion of legal action by Botany Bay City Council in the Court of Appeal.

This took the total number of new councils created in 2016 to 20.

Read the progress report outlining the achievements of these councils

On 14 February 2017, the Government announced it is continuing its in-principle support for the creation of a further five new councils in metropolitan Sydney, subject to decisions of the courts.

This would see the number of councils in Greater Sydney reduced from 41 to 24.

There will be no further regional council mergers. Regional councils have already undergone much more consolidation than the city – prior to the new councils created in 2016, regional council numbers had already decreased from 133 to 111 in the past 15 years. By comparison, in Sydney, most council boundaries have not changed since the 1940s, and some have remained unchanged for more than 100 years.

The 20 new stronger, more efficient councils that have already been established will remain in place and are working harder for residents and delivering better services and infrastructure such as roads, parks, playgrounds and sporting facilities.

New councils will receive a wide range of additional benefits:

  • Each new council will receive up to $15 million to invest in community projects like junior sporting facilities, playgrounds and library or pool upgrades.
  • Each new council will receive up to $10 million to streamline administrative processes and cut red tape, with the option of redirecting unspent funds into community projects.
  • Ratepayers in new council areas will not experience rate rises as a result of mergers. They will pay no more for their rates than they would have under their old council for the next four years.

The following new councils commenced in 2016:

08 Mar

The most important things to know about investing in a granny flat

While granny flats are typically seen as the domain of teenagers or elderly relatives, they can also make highly successful investment properties.

The humble granny flat is traditionally seen as a way to add more space to your home. Maybe you’ve got a moody teenager who wants more space (while still enjoying the perks of living at home) or maybe your elderly mum or dad is looking for somewhere to live that’s close to the grandkids.

Granny flats can also be used as an investment property to generate rental income for you and your family. They’re relatively cheap to buy or build, easy to maintain and can provide a steady source of income. However, buying or building a granny flat as an investment property isn’t without risks, so read on to find out more about the benefits and drawbacks of investing in a granny flat.

Buying or building a granny flat

As housing affordability issues continue to hit people hard in Australia’s capital cities, it’s becoming more tricky to find an affordable, low-maintenance rental property in a desirable location. With this in mind, a granny flat could be a great way to use the space you already own to maximise your income.

Granny flats are typically defined as “secondary dwellings”, which basically means that they’re built on the same lot of land as the main dwelling. Granny flats are also “self-contained dwellings”, meaning they have a separate entrance and their own bathroom, kitchen, bedroom, laundry and living space.

There are several options for adding a granny flat to your property, such as adding a standalone building in your backyard or building a secondary dwelling as an extension over the garage. Wherever you choose to add the granny flat, it’s important to remember that it will need to have its own entrance in order to meet regulations.

What rules and regulations need to be considered?

Housing affordability issues around Australia have prompted a number of state and territory governments to introduce measures that make it easier to build a granny flat. In NSW, for example, the Department of Planning and Environment introduced new regulations to make it easier and quicker to obtain granny flat approval, which has seen the number of approved new granny flats jump from 1,500 in 2010 to more than 4,800 in 2014.

Along with NSW, the governments of Western Australia, the Northern Territory, Tasmania and the ACT all allow their residents to rent out a granny flat to generate extra income. Unfortunately, this practice is currently not allowed in Queensland, Victoria and South Australia.

Before you buy a modular granny flat or start building your own, it’s essential to make sure your planned addition will be fully compliant with all the relevant laws. Check with your local council to find out what regulations apply in your area, but as a general rule your granny flat will need to:

  • Be built on a property that is zoned for residential use
  • Be built on a property at least 450 square metres in size
  • Be the only granny flat on the property
  • Be owned by the same person that owns the primary dwelling on the property
  • Have a maximum living space of around 60 square metres (this figure varies and typically does not include verandahs, carports and patios)
  • Have separate and unobstructed pedestrian access

Once you’re sure that your project will meet all the necessary requirements, you can apply for planning approval from your local council.

How much does it cost to add a granny flat?

The cost involved in adding a granny flat to your home varies depending on the type of granny flat you choose. But generally you’d be looking at a minimum spend of around $100,000 to get the new residence up and running.

If you’re looking to build, there is also a huge range of options when it comes to the design and type of dwelling you want. From prefabricated and modular homes to dwellings built from scratch, your choice will be influenced by your budget, the designs available and the features you want to include in the granny flat.

If you’re thinking of adding a granny flat to your property as part of a renovation or extension, then costs could head north of around $120,000. You’ll also need to factor in engineering costs and possibly architect’s fees, as well as money for any existing or potential hazards such as asbestos.

Tristan’s Granny Flat Investment

Tristan lives in a four-bedroom home on a 700-square-metre block in Sydney’s northwestern suburbs. He has a significant amount of space in his backyard, which is a chore to maintain all year round, so he decides to add a granny flat as an investment that can earn him rental income.

Tristan decides a modular kit home is the right fit for his property, and spends a total of $100,000 getting the home built and installed on site, with all the plumbing and electrics connected. As his property is located within 500 metres of a train station, Tristan is able to rent the two-bedroom flat out to a young professional for $460 a week.

Factoring in a budget of $2,000 per year to cover maintenance costs, let’s take a look at how long it will take Tristan to pay off his investment.

Rent: $460 a week

Total annual rental income: $23,930

Annual maintenance expenses: $2,000

Total income generated each year: $21,930

Time needed to pay off granny flat: 4.56 years

As you can see, at the current rental rate, Tristan will be able to pay off the cost of his investment in just over four and a half years. He can then start using his granny flat to generate disposable income.

Keep in mind that this is just one scenario and there may be a range of other factors to consider. For example if you have to borrow money to fund the addition of a granny flat to your property, it may take longer for your investment to generate positive cash flow.

What are the tax implications of a granny flat investment property?

If you rent out a granny flat to generate extra income, remember that you will need to pay tax on the rental income you receive. The amount of tax payable will depend on your income tax bracket and marginal tax rate.

The tax deductions you are eligible to claim will depend on whether your granny flat investment is positively or negatively geared. If the rental income generated by the granny flat is not enough to cover the cost of maintaining it (with loan interest payments and other ongoing expenses), then your property will be negatively geared and you can claim your loan interest payments and ongoing expenses as tax deductions. However, owners of properties that aren’t negatively geared will only be able to claim their ongoing maintenance expenses as tax deductions.

You will also be able to claim the depreciation in value of your granny flat investment as a tax deduction each year. Just be aware that a Capital Gains Tax (CGT) liability usually applies to the portion of your property that you rent out.

Will a granny flat add value to my property?

If you’re wondering whether a granny flat will increase the value of your property, the answer is yes – but only if it complies with all local council regulations. If you think your house will be more practical and better to live in with an extra independent living space out the back, chances are a potential buyer will think the same thing.

In many cases a granny flat can add significantly to the value of your property. However, you’ll need to consider a range of variables when calculating your return on investment, including the size of the granny flat, its location and how much it costs to build.

Pros and cons of granny flat investment properties

Pros

  • Affordable investment. Buying or building a granny flat is usually cheaper than buying a standalone investment property, allowing you to start your investment portfolio without borrowing a huge amount of money.
  • Rental income. Depending on where you live and the size/features of the granny flat, your investment could provide several hundred dollars of rental income per week.
  • Adds value. A legally compliant granny flat will add to your property’s total value.
  • Handy addition. If your circumstances change and you need somewhere for a relative or friend to live, your granny flat can provide the necessary accommodation.

Cons

  • Tenants. You’ll need to be prepared to deal with tenants living on your property, which could potentially lead to some tense and awkward situations.
  • Cost. The cost of constructing a granny flat may be more than you expect and the expenses can quickly add up.

Tips for getting the most out of your granny flat investment

  • Do your research. Before adding a granny flat to your property, find out whether it will be a viable investment. Consider council regulations, the demand for rental properties in your area and the cost of installing a granny flat before you make your final decision.
  • Get quotes. Get accurate quotes from builders and contractors to form a clear picture of exactly how much the build will cost.
  • Loan options. If you need to borrow money to finance your granny flat investment, speak to a mortgage broker about your borrowing options. If you have sufficient equity in the property, you should be able to get the money you need by increasing or refinancing your existing loan.
  • Adding a granny flat to an investment property. While the most common approach is to add a granny flat to your own property, you can also build a granny flat on an investment property. If this is the case, you’ll need to consider the cost of maintaining both properties, the potential rental yield, and the effect that adding a granny flat might have on the demand for the main dwelling.
  • Be consistent. If you want the granny flat to add value to your property, make sure it matches your existing home and doesn’t look like an afterthought. It’s also essential to ensure that the granny flat doesn’t dominate the garden or take up too much outdoor space.

If you’ve got enough space and the right property, a granny flat can be a sound investment. Just be sure to research your options and learn more about the risks involved before deciding whether it’s the right investment opportunity for you.

(Content sourced from finder.com.au article ‘Important Things to Know when Investing in a Granny Flat)

08 Mar

Becoming an owner-builder

An owner-builder is an individual authorised to do owner-builder work under a permit issued by NSW Fair Trading.

What is owner-builder work?

Owner-builder work is any work (including supervision and coordination) involved in the construction of, or alterations, repairs or additions to, a dwelling:

  • where the reasonable market cost (including labour and materials) exceeds $10,000, and
  • which relates to a single dwelling-house, dual occupancy* or a secondary dwelling that:
    – requires development consent under Part 4 of the Environmental Planning and Assessment Act 1979, or
    – is a complying development within the meaning of that Act.

*Note: an owner-builder permit will only be issued regarding a dual occupancy in cases of special circumstances.

Top of page

Should I do owner-builder work?

An owner-builder permit is designed to allow people who have the skill or capacity to build their own house or supervise construction by coordinating appropriate sub-contractors. While an owner-builder permit is not a builder’s licence, as an owner-builder, you are responsible for the building work as a fully licensed builder would be.

Taking out an owner-builder permit significantly impacts on you as the property owner and permit holder. Under the permit, you become ultimately responsible for managing and coordinating the completion of the building work. You must still engage licensed contractors to complete any specialist work related to the construction. For any other work, you must ensure the tradesperson is appropriately licensed for the scope of work needed.

If you don’t want this responsibility, be wary of a builder who suggests you obtain an owner-builder permit while they do all the building work for you. This may be a ploy where the builder is shirking responsibility, is unlicensed, or is unable to get necessary insurance.

WARNING! As an owner-builder you are guaranteeing the work you undertake. The next immediate owner of the property is entitled to the benefit of the statutory warranties set out in the Home Building Act 1989.

Top of page

What are my responsibilities?

As an owner-builder, you are responsible for:

  • overseeing and supervising all tradespeople
  • ordering materials and managing the building site
  • obtaining all necessary council and authority approvals
  • ensuring that the financial, taxation and insurance requirements of the building work are met and fully comply with all laws
  • being aware of your obligations under the Workers Compensation Act 1987 and the Work Health and Safety Act 2011 to provide a safe work environment that complies with WorkCover requirements. Significant penalties may apply if you don’t meet this obligation.

  • ensuring any contractor engaged is appropriately licensed and insured to do the work contracted for
  • warranting that the materials and work will be fit for the purpose and result in a dwelling that can be occupied.

Do your sums before you start and ask if any saving you will make is worth the time and responsibility it will take. It is also encouraged that you discuss your situation, including obtaining funding for any owner-builder work, with a professional who can provide financial advice to best suit your circumstances.

It is an offence under the Home Building Act 1989 (maximum penalty $22,000) for the holder of an owner-builder permit to:

  • knowingly engage an unlicensed contractor
  • lend their permit to another person
  • refuse to disclose to an authorised officer the names and addresses of contractors working on the site.

Top of page

Do I need an owner-builder permit?

An owner-builder permit is not needed where:

  • the market value (labour and material) of the residential building work is less than $10,000
  • the work does not require development consent.

To be eligible for an owner-builder permit, the development approval must be in respect of a single dwelling-house or a secondary dwelling. In special circumstances dual occupancies may be approved.

An owner-builder permit cannot be issued for:

  • renovations to an existing apartment/unit/flat/townhouse within a strata complex
  • property not for residential purposes.

Top of page

How do I get an owner-builder permit?

To get an owner-builder permit, you must lodge a completed owner-builder permit application in person at a Service NSW centre.

To determine if you need an owner-builder permit and the application form to use, view the Owner-builder self assessment tool page on the Fair Trading website.

The application form for an owner-builder permit can also be downloaded from the Australian Business and Licence Information Service website at https://ablis.business.gov.au. Use the self assessment tool first before completing your application.

When lodging your application form you must also attach copies of the following documents, together with proof of identity requirements and the owner-builder permit application fee:

  • evidence of ownership or a registered lease with Land and Property Information
  • development consent (development application (DA) approval or complying development certificate (CDC) approval) from a certifying authority (council or private certifier) for the subject building site
  • a current general construction induction training card (within the meaning of the Work Health and Safety Regulation 2011), also referred to as Workcover Whitecard or a WorkCover Statement of Training
  • if the work is over $20,000 in value, evidence that you have met the owner-builder education requirement
  • all other owners of the land for which an owner-builder permit may apply must also be listed – these other owners will not be able to apply for another owner-builder permit relating to different land for 5 years.

For the current general construction induction training card (Item 3 above), Fair Trading will also accept a WorkCover Statement of Training, issued within the 60 days prior. This acknowledges that it may take up to 60 days to issue the general construction induction cards once you have completed the relevant training.

Fair Trading will also accept, in certain circumstances, interstate general construction induction training cards or cards issued in NSW under previous arrangements that are recognised under Work Health and Safety laws.

The following Fair Trading web pages provide more information regarding required units of competency for owner-builder education and if an applicant is eligible to be exempted from the education requirement:

Top of page

What are my limitations under the permit?

An owner-builder permit is not a building licence. It does not allow you to do:

  • work other than the project covered by the development application or complying development certificate
  • specialist work such as electrical, plumbing, gasfitting, airconditioning and refrigeration work (unless you hold a licence for such work).

Only one owner-builder permit can be issued within any 5-year period, unless the application and any earlier permit relate to the same land, or special circumstances exist.

Top of page

Approvals needed for building work

Most building work needs the following approvals before work can start.

Development consent or Complying Development Certificate (CDC)

Your local council can issue development consent. If a CDC is permitted for the type of development you propose under the council’s local plan, it can be issued by your local council or an accredited certifier.

Construction approval

Approval for the work (a construction certificate) can be given by either your local council or an accredited certifier.

During construction, the building work must also be inspected by council or an accredited certifier to check that it meets national building standards (the Building Code of Australia).

A certificate to allow occupation or use of the completed building work (occupation certificate) can only be issued if the work generally meets these standards.

For more information about building work approvals and choosing a certifying authority visit our Consumer building guide web page to view or download our Consumer building guide.

You can also find out more about the approvals process and choosing a certifying authority from the Building Professionals Board at www.bpb.nsw.gov.au or by calling 9895 5950.

Top of page

Use licensed tradespeople

Tradespeople (whether contracting directly with home owners or sub-contracted through a builder), who do home building work costing over $5,000 (labour and materials), must hold a Fair Trading licence for the type of work they are to do. Regardless of the work’s cost, specialist tradespeople must be licensed for doing:

  • electrical wiring
  • plumbing, draining and gasfitting work
  • airconditioning and refrigeration work (except plug-in appliances).

Before you sign any contract, don’t forget to:

  • ask to see a tradesperson’s licence
  • use the licence check on the Fair Trading website to make sure it is current, valid and suitable for the work you want done, or call Fair Trading and do a licence check over the phone.

Top of page

Contracts

When entering into contracts with a licensed tradesperson, refer first to our Contracts web page.

Top of page

Insurance under the Home Building Compensation Fund

Does the total contract sum exceed $20,000 (including material supplied by the contractor)? If so, each licensed contractor (builder or tradesperson) who contracts directly with an owner-builder to do residential building work must provide insurance under the Home Building Compensation Fund (previously called Home Warranty Insurance) from an approved insurance provider.

You as the owner-builder should receive a copy of the certificate of insurance before:

  • work starts
  • you pay any money.

For details see our Home Building Compensation Fund web page.

Selling an owner-builder built home

Insurance under the Home Building Compensation Fund is no longer available for owner-builder work done by an owner-builder. Should an owner-builder or a successor in title to that person decide to sell their home within 7 years and 6 months after an owner-builder permit was issued, the contract for sale must include a note (a consumer warning) stating that: an owner-builder permit was issued in relation to the land on the date it was issued.

Work done under an owner-builder permit is not required to be insured under the Home Building Act 1989 unless the work done by a contractor to the owner-builder is worth more than $20,000.

If the consumer warning is not included in the contract of sale, the purchaser can void the sale contract before settlement.

WARNING! As an owner-builder you are guaranteeing the work you undertake. The next immediate owner of the property is entitled to the benefit of the statutory warranties set out in the Home Building Act 1989, and can take you, the owner-builder, to the NSW Civil and Administrative Tribunal to enforce their statutory warranty rights. This may result in a money order against you.

Top of page

Other insurances

Consider other insurances you may need as follows.

Workers compensation insurance

Owner-builders should take out a workers compensation insurance policy and ensure that they are fully covered for people they engage to carry out work. Any contractors engaged by an owner-builder may be deemed to be a worker of that owner-builder.

For more information about workers compensation insurance, contact WorkCover at www.workcover.nsw.gov.au or call 13 10 50.

Contract works insurance

This insurance should be obtained by builders and trade contractors. It is for your protection and covers loss or damage to materials and work. If the builder or trade contractor does not have this type of insurance, you may risk inconvenience, time delays and disputes if materials are damaged or stolen.

Public liability insurance

If you intend to be an owner-builder or to contract out any type of building work (for which you remain responsible for coordinating), it is strongly recommended that you take out a public liability insurance policy.

This covers you if a family member or member of the public is injured as a result of the building work. You could be liable because you own the property.

Top of page

False or misleading information with your application

You may be prosecuted under the following sections of the Crimes Act 1900 if you falsely state or leave out information in an application for an owner-builder permit:

  • under s.307A of the Crimes Act 1900 a person is guilty of an offence if she/he makes a false or misleading statement in an application for an authority or benefit. The penalty for false or misleading application is imprisonment for 2 years, or a fine of $22,000 or both
  • under s.43(1) of the Home Building Act 1989 the Commissioner may cancel a permit if it is later discovered that a permit holder misrepresented information in their permit application.

Top of page

Dispute handling

We offer services that may help you avoid or resolve disputes with your contractors. For details see our Resolving building disputes web page or call 13 32 20.

Top of page

Sources of information

For more information contact us on 13 32 20 or refer to our website. You may also seek information from:

  • your local council or government agencies such as the Department of Planning and Infrastructure and the Building Professionals Board
  • building centres and professional builders
  • books, magazines and websites on owner-building
  • the approved owner-builder course.

Top of page

(Content sourced from Owner Builder Laws – Dept. Of Fair Trading NSW)