Owning & renting out

Renting Out a Granny Flat in Victoria

Planning and building permits, the strict gas-connection ban, and who actually pays for water, electricity and internet — what Victoria's small second dwelling rules mean once you're renting it out.

What actually counts as a "small second dwelling"

Victoria's planning rules use a specific term — a small second dwelling — for what's commonly called a granny flat: a self-contained residence with its own kitchen, bathroom and toilet, no more than 60 square metres, built on the same lot as an existing home (Department of Transport and Planning (Victoria), verified 20 Aug 2026). That definition matters, because a different category — a dependent person's unit (a movable building for someone dependent on a resident of the main home) — follows separate rules with their own transition dates, and the two are easy to conflate. This guide covers the small second dwelling, the one you'd typically build to rent out.

Do you need a planning permit?

Since Amendment VC253 (gazetted 14 December 2023), a small second dwelling generally doesn't need a planning permit in residential and rural zones, provided there's no flood, environmental or other special planning control affecting the land (Department of Transport and Planning (Victoria), verified 20 Aug 2026). A building permit is always required, regardless of the planning-permit position, and the dwelling can't be subdivided or sold off separately from the main home. There's a genuine catch on lot size: on a residential-zoned lot under 300 square metres (other than a Low Density Residential Zone), a planning permit is still required, assessed against the Clause 54 residential development provisions — standards updated as recently as Amendment VC282, effective 8 September 2025 (Department of Transport and Planning (Victoria), verified 20 Aug 2026). On a lot of 300 square metres or more, that planning-permit step generally falls away and the building-permit process alone applies.

Yes, you can rent it out — to anyone

A small second dwelling isn't restricted to family use. Anyone can live in or rent it out, including a family member, a dependent person, or someone entirely unrelated to you (Department of Transport and Planning (Victoria), verified 20 Aug 2026). Once tenanted, the same residential tenancy requirements that apply to any rental home apply here too — minimum room sizes, required facilities and working smoke alarms among them — so treat it as a genuine, separate tenancy from the outset, not an informal arrangement. If the tenancy ever ends up in dispute, it's decided the same way as any other Victorian tenancy: by VCAT (Consumer Affairs Victoria, verified 18 Aug 2026) — see ending a tenancy for notice periods and process.

The gas rule that surprises people

A Victorian small second dwelling must not be connected to reticulated natural gas — a flat rule introduced by the same Amendment VC253, and it applies regardless of whether the dwelling needed a planning permit at all (Department of Transport and Planning (Victoria), verified 20 Aug 2026). That's a stricter, more absolute rule than the general gas-connection prohibition that applies to new dwellings generally (Amendment VC250, from 1 January 2024, which carries various exemptions) — for a small second dwelling specifically, there's no exemption to check. Budget for all-electric appliances — induction cooking and an electric or heat-pump hot-water system — from the design stage, not as an afterthought. It's also the direction the rest of the state is heading: from 1 January 2027, all new Victorian homes must be built all-electric, and from 1 March 2027, gas hot-water systems in existing homes must be replaced with an electric alternative once they reach end-of-life (Department of Transport and Planning (Victoria), verified 20 Aug 2026) — existing gas cooking and heating appliances aren't affected by that change, and bottled LPG is unaffected throughout.

Utilities: who pays what, and the metering reality

A granny flat generally can't get its own separate water connection or meter, because it isn't separately titled from the main home. That's a plumbing and titling reality, not itself the legal rule — the actual rule under the Residential Tenancies Act 1997 is meter-based: if a property has its own meter, the renter pays for what they use; if it doesn't, the rental provider must pay (Consumer Affairs Victoria, verified 20 Aug 2026). In practice, that means you as landlord are the one billed for an unmetered utility like water — but you can agree with the renter, as a special condition written into the rental agreement, to apportion a fair share of that unmetered cost back to them as part of rent. The same metered/unmetered logic applies to electricity and gas. Phone and internet work differently again: you as the rental provider must pay for the initial connection, including to the NBN, while the renter pays ongoing usage once connected (Consumer Affairs Victoria, verified 20 Aug 2026) — worth resolving before you advertise the tenancy, since a granny flat sharing infrastructure with the main house can make a genuinely separate NBN connection more complicated than it would be for a standalone property.

Before you list it

If you're renting out a small second dwelling you didn't build yourself — inherited, or already on a property you bought — confirm with the council that it was actually approved under the correct pathway (or is a lawful pre-existing structure), rather than assuming a granny flat you find on a property is automatically compliant. A structure built without the right approval can mean a much harder, sometimes costly, retrospective approval process before it can legally be tenanted at all — a real, recurring anxiety among owners in exactly this situation. See property due diligence for how to check a specific property's approval history before you buy or before you list an existing structure.

Practical checklist

Before renting out a small second dwelling

• Confirm the dwelling was actually approved under the correct planning/building pathway for its lot size — not assumed compliant
• Check it isn't connected to reticulated natural gas, and budget for all-electric appliances if it is
• Decide how unmetered utilities (typically water) will be handled, and put any apportionment in writing as a lease special condition
• Resolve the phone/internet/NBN connection before advertising the tenancy
• Treat it as a genuine, separate tenancy — same minimum standards, same dispute body

Questions for a professional

• Was this small second dwelling approved under a planning permit, the permit exemption, or does it need retrospective approval?
• What would it cost to convert this dwelling's hot water and cooking to all-electric if it's currently gas?
• Given our lot size, do we need a planning permit or just a building permit?

Official resources

• Planning Victoria: Small second homes
• Planning Victoria: Victoria's Gas Substitution Roadmap
• Consumer Affairs Victoria: Paying for utilities and services

Sources and methodology

• Small second homes — Department of Transport and Planning (Victoria) (retrieved 20 Aug 2026)
• Victoria's Gas Substitution Roadmap — Department of Transport and Planning (Victoria) (retrieved 20 Aug 2026)
• Paying for utilities and services — Consumer Affairs Victoria (retrieved 20 Aug 2026)
• Notice to vacate in rental properties — Consumer Affairs Victoria (retrieved 18 Aug 2026)

Figures on this page are drawn from Delora's local knowledge graph, refreshed from these primary sources and checked for changes on a regular schedule. If a figure here looks out of date, the official source above is always the authority — please let us know.