Looking into granny flats i have come across an interesting outcome regarding the cgt consequences when one family member pays for the construction of a granny flat on another family member's property. For example where an elderly couple sell their home and using these proceeds pay their child say $100K to be used to build a granny flat on the child's property for them to live in for the rest of their lives. Under this scenario according to taxation ruling TR 2004/16 cgt event D1 is triggered - creating a right. Due to this event, the child is deemed to have made a $100K capital gain and to make matters worse this is not subject to the 50% discount. This means that almost half of the $100K intended to be used for the granny flat may be lost depending on individual tax rates. Is there any way to avoid this from occurring?