The finding came after a review launched earlier this year found about 60 council staff had access to council cars to take home, despite many no longer needing to.
The review also identified ''ad hoc'' processes governing their use, which amounted to an extra benefit for some staff while others missed out.
Council group chief financial officer Grant McKenzie, contacted yesterday, confirmed to the Otago Daily Times that could, in theory, see the council facing a backdated bill for fringe benefit tax (FBT).
''In a general sense, that could be one outcome,'' Mr McKenzie said.
He could not say how big any bill might be, or even if one would need to be paid, until after the circumstances of each case of staff use of council cars was studied over the next month.
The council was discussing the issue with its tax adviser, which was in turn in contact with Inland Revenue staff, he confirmed.
''Council traditionally meets its tax liabilities, so I would not expect that to change.
''If we have any obligation, we will be paying it as soon as possible.''
FBT was aimed at employees who received private use of an employer's vehicle as a result of their employment, albeit with some exceptions, the IRD said.
Council organisational development and performance group manager Marian Rillstone, speaking last week, said the council's review of vehicle use had identified more fringe benefit tax would ''probably'' be paid by the council in future.
''We've got certain groups of staff who we worked out we probably need to pay fringe benefit tax on.''
The tax would be applied to staff who continued to take vehicles home at night, where it made ''good business sense'' even if not strictly necessary for their roles, she said.
Mr McKenzie said the situation was complex, and exemptions to FBT included the type of vehicle used, whether it was sign-written, individual staff members' employment contracts, and the business need for allowing personal use.
''It's not quite as simple as saying `they've taken the vehicle home, therefore there needs to be a fringe benefit tax liability'.
''If you've got a person on a large salary with a high-value vehicle, that's going to cost you a hell of a lot more than someone who's driving around in a Hyundai Getz who's on a lower salary.
''You need to look at the circumstances of each individual case.''
He expected to know the extent of any council liability within the next month, and said tax obligations for the future would also change.
