Auckland Council is considering ways to avoid being hit by a possible $220 million tax bill under new Government legislation.
To do this, the Council is looking into transferring ownership of some of its assets in an $800 million property portfolio, which includes strategic waterfront sites.
A report to Auckland Council's finance and performance committee which meets tomorrow recommends options on the transfer of properties including Queens Wharf, Westhaven Marina, the America's Cup village sites and other Panuku Development Auckland land.
Hobson Wharf, the land around the Viaduct Basin, development sites spread across the Wynyard Quarter, land at Mechanics Bay and beside the Auckland Harbour Bridge could also be involved.
Panuku owns big public spaces and many development sites and marinas currently valued at around $800m, the report said.
The council has legal ownership of those properties but in the next 10 to 20 years, once waterfront development is complete, legal ownership would be transferred from one council-controlled entity to another.
If that happens after July 1 this year, a $220m tax bill could be possible and that will have a significant impact on rates and debt due, the report said.
"When the tax law changes come into effect, transferring waterfront assets from a council-controlled organisation [Panuku] to the council entity for no cost will be considered taxable income. The resulting tax liability from a transfer of waterfront land in the future could be about $220m, depending on the exact make-up and their value at the time the properties transferred," the report said.
"The council's tax advisors are working with Inland Revenue to obtain a binding ruling to
provide certainty about the tax treatment of our proposal," it said.
The council could speed up the transfers to avoid the tax bill and a decision on the issue could be made by early May.
The issue is on the council's agenda for consideration tomorrow.
The meeting item is headed 'transfer of legal ownership of properties within the council
group' and refers to the purpose of the report being 'to agree the scope of the land transfer from Panuku Development Auckland to the council entity to be consulted on alongside the Annual Budget 2019/2020.'
The council is faced with options: no transfer of the land, a partial transfer or a full transfer.
The committee considering these options meets at 9.30am tomorrow. It is chaired by Ross Clow, deputy chairperson is Desley Simpson and members include Cathy Casey, Chris Darby, Christine Fletcher and mayor Phil Goff.