Categories: Small Business, Tax



Australia is facing a shortage of skilled labour. When the supply of staff dry up the focus often turns to retention. But the first step is to understand why people you want to stay, choose to move on? 

Very few people will reveal the whole truth about why they leave an employer. Partly they don’t want their previous employer to think badly of them, they don’t want to hurt anyone’s feelings, and for others, it’s just not worth getting into it. However, there is almost always a catalyst for change. It might not always be the employer but it is very rare that it is “just time”. 

  1. Change in leadership – Leadership vacuum or concern about the impact of the change.   
  1. Work not challenging – This is the classic reason for leaving that is behind the “it’s just time” comment.  The employee feels as if the company has nothing left to offer. 
  1. Conflict with a supervisor – Your business can have the best retention policies and strategies in place but a conflict between Manager and subordinate is immediate and damaging. 
  1. Change in company dynamics – Each company is generally made up of smaller sub groups.  These might be based on age, gender, professional status or cultural identity.  The loss of a popular team member from one of these groups will be more deeply felt by their subgroup.  
  1. Unfavourable change in responsibilities – Changes in team structures, reallocation of resources or taking on new assignments that are not within the skills set or comfort level of the employee. 
  1. Life work balance issues – Retention is about mutual respect for priorities.  The employer respecting the employee’s personal responsibilities and employees recognising that they have corporate responsibilities.  Both need to be fulfilled. 
  1. Poor recruitment – Professional or cultural misfits.  Ever hired Mr Right now rather than Mr Right? 
  1. Lack of recognition for perceived value – Overlooked for opportunities held out but not delivered. 

Sometimes, it’s not all bad. We’ve all had them; that employee who is the cultural and professional misfit.  Decisive action when there is a poor fit can improve team morale.   

Tax exemption for ‘granny flat’ arrangements 

To protect older Australians, the Government has moved to formalise granny flat arrangements by providing an incentive to protect all parties in the arrangement.  

Typically, granny flat arrangements occur when an older person transfers some sort of consideration (often title to property or proceeds from the sale of property) to their adult child in exchange for the promise of ongoing care, support and housing. In some circumstances, it’s a way for a parent to give their children access to their inheritance when it’s needed not at a later point when the person dies. 

However, a 2017 Australian Law Reform Commission report highlighted the potential for elder abuse where granny flat arrangements fall apart. If the relationship breaks down, or other unforeseen circumstances arise, the older person can be left homeless. A central problem is a lack of formality in these arrangements.  

The tax system, in particular, the capital gains tax (CGT) system, acts as a disincentive to formalising a granny flat arrangement. Under the current rules if a granny flat arrangement if formalised, this can lead to an upfront tax liability for the home owners. Also, the children can potentially lose part of their main residence exemption when the parent pays for the right to live in the home depending on how the arrangement is structured. If the arrangement is left informal, and the money paid by the parent is merely a gift, the main residence exemption is generally unaffected. 

Recently released exposure draft legislation seeks to overcome the disincentive to formalising a granny flat arrangement by providing a CGT exemption. 

This does not mean that every separate dwelling built out the back of a house will have a CGT exemption. The legal meaning of granny flat is derived from social security law; it describes an arrangement rather than a type of accommodation and can arise whenever money or other consideration is given in exchange for a right to use accommodation for life.  

The draft legislation provides that no CGT event will arise from a granny flat arrangement where certain conditions are met including where the individual with the granny flat arrangement has: 

  • Reached pension age or has a disability, and  
  • That the arrangement is in writing and is not of a commercial nature.