Auckland Council is considering changing ownership of big chunks of land on the Auckland downtown waterfront to avoid a possible $220 million tax bill under new government legislation.
The land includes Queens Wharf, the Westhaven marina, the sites for the new America’s Cup Village and other development sites valued at $800 million and currently owned by the council controlled organisation Panuku Development Auckland.
A report for an extraordinary meeting of the council’s Finance and Performance committee on Wednesday says that land would normally be transferred back to direct ownership by the council itself once developments were completed in years or decades to come.
However tax law changes which will take effect in July would see any such transfer at no cost subject to being taxed as ‘income’ and the ratepayers hit with a liability of around $220 million.
This could have a significant impact on the council’s rates and debt.
The council is now being advised by its officials to fast-forward the change of ownership to avoid that potential bill – which while a saving to the Auckland ratepayer would be at a cost to the national taxpayer.
Auckland Council’s tax advisors are working with the Inland Revenue Department to “obtain a binding ruling to provide certainty about the tax treatment of our proposal”.
That would ensure the attempt to get ahead of the tax – a classic arranging of financial affairs to avoid taxation – is not later subject to challenge for deliberating dodging any bill due the state.
Panuku and its predecessor were given ownership of the land in question when Auckland local bodies amalgamated in 2010 to form the super city.
Its board has told the council it believes there is a good case for it to retain ownership of some of the waterfront land and water rights assets – which as well as the Westhaven marina also include berths and marine activities on the western side of Wynyard Point – the zone formerly around the old Tank Farm.
If the transfer of ownership to avoid the new tax rules is approved, Panuku wants delegations in place immediately from the council ensuring it remains the manager and developer of the waterfront properties.
The Finance and Performance Committee has to decide whether to start public consultation on the full transfer of the waterfront land. The change requires an amendment to the council’s 10 year plan for 2018-28 and requires a special consultative procedure.
Councillors have been warned by staff that any delay in starting the consultation from this Sunday February 17 could run a risk officials run out of time to make the ownership changes ahead of the the tax change deadline.
Immediately after the finance committee meeting, the full council will also hold an extraordinary meeting to fast-track the consultation and decision-making process.
The decision to switch the legal ownership would need to be made at a full council meeting on May 2.
Beyond Queens Wharf, Westhaven and the America’s Cup village land, affected properties include Hobson Wharf, land around the Viaduct Basin, development sites in the Wynyard Quarter, and open land at Mechanics Bay and beside the Harbour Bridge.
They include freehold land on commercial sites, such as hotels or apartment buildings and completed public spaces.
Transferring ownership before July 1 is seen by officials as giving the council greater “flexibility for waterfront land ownership options in the future”.
Panuku is responsible for other big land developments including urban transformations at Onehunga, Manukau and Avondale but does not own that land, instead being delegated the power to develop and manage it.