The aggregation rule in the federal budget's expanded instant asset write-off is set to exclude a number of larger Australian businesses despite the high $5 billion turnover threshold.
The Corporate Tax Association believes at least 79 out its 130 corporate members would be ineligible for the instant asset write-off and the loss carry-back measures because the aggregated turnover rule would see the turnover of their overseas affiliate grouped with them and cause them to breach the $5 billion threshold.
This comes despite Treasurer Josh Frydenberg claiming in his budget speech that over 99 per cent of business would be able to access the measures and that it would be a "game changer" to encourage investment.
CTA executive director Michelle de Niese said it would seem counterintuitive to leave out such large taxpayers who were capable of bringing forward investments and kickstarting the economy.
"A sensible read of the $5 billion aggregated turnover test set the expectation on budget night that the larger mining, oil and gas and banking entities with Australian turnover over that amount would be excluded from the measure. Upon seeing the bill, it became clear that there would be a much larger number of companies that are ineligible," said CTA executive director Michelle de Niese.
"A number of CTA members have expressed surprise, disappointment and, in some instances, genuine disbelief that their businesses are ineligible, noting that the sentiment expressed by the Treasurer on budget night strongly implied that this measure was aimed squarely at them.
"We suspect there will be more, and no doubt others with smaller Australian-based operations, who happen to be affiliates with larger foreign-based and local groups."
Despite the protestations, the omnibus bill containing the federal budget tax measures passed Parliament without amendments on Friday.
The Tax Institute's senior advocate, Robyn Jacobson, said that while the government may have intended to exclude very large businesses, some smaller Australian-based companies may find themselves ineligible because of their connections to larger offshore operations.
"The problem is if you have another entity where you own at least 40 per cent of them or they have an interest of at least 40 per cent in you, or you are commonly controlled by a third entity to the extent of 40 per cent or more, the entity is connected with you," Ms Jacobson said.
"If we think of a number of large Australian businesses that have a substantial shareholder overseas, the turnover of the overseas entity is grouped with the Australian entity and that is going to result in a lot of Australian businesses not being eligible for this - while their turnover is under $5 billion, their aggregated turnover is not.
"It all stems from the fact that this aggregation rule goes all the way back to the $2 million threshold for the small business CGT concessions, but they've used the same rule repeatedly throughout the tax law but the numbers keep getting bigger.
"It is almost not fit for purpose now because it is resulting in practically a number of businesses who simply won't be eligible for this."