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The Question of Tainting

The Question of Tainting

The complex question of tainting is explained by expert accounting, Matthew Gilligan.

By: Matthew Gilligan

4 July 2024

Q: I bought land at the end of 2017, built a house and moved into it in 2018, and have lived there as an owner-occupier since. Under the fixed-price contract my father was the builder. Does the associated party (builder/developer) 10-year time period affect the sale in 2024. I would be grateful for guidance. 

A: I have to be careful in answering this question as there can always be additional facts that are not revealed in a quick summary. However, the fact that your father built the house and is a builder should not in and of itself taint your property.  Tainting can arise where there is “association” between the owner of a property on the one hand and a party who is engaged in a business of erecting buildings on the other.

In most cases, an adult child is not associated to their parents. Generally speaking, this means what your parents do should not taint your properties.  However, for every rule there is always an exception, and without knowing all the details on how the building activity is structured, I cannot reach a definitive conclusion.  Another point is that even when a property is tainted, there is a residential exemption which applies where you build a house on land and that house is occupied by you mainly as a residence and the total related area of land is less than 4,500 square metres.

 Provided you have not engaged in a regular pattern of buying and selling homes, the exemption can apply in a scenario where the property is tainted. In summary, you should take the time to get a proper appraisal done of the tax consequences of this proposed sale. For the reasons noted above, I suspect tainting is unlikely, but it’s not a conclusion I can reach definitively based on the facts at hand.

Matthew Gilligan