Taxation Ruling

IT 43

Investment allowance - truck cabs/chassis and bodies

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FOI status:

May be releasedFOI number: I 1100333

Facts

The question arose whether expenditure on a new truck cab and chassis to which a previously used truck body was fitted is eligible for the investment allowance deduction. The answer to the question depends upon the extent to which a truck cab and chassis can be said to constitute a unit of eligible property. This in turn depends upon whether it can be said that the truck cab and chassis is an item of plant in its own right or whether it is part of some larger item of plant, i.e., the functionally complete vehicle comprising cab and chassis plus whatever truck body is affixed thereto.

2. In the circumstances in which the question arose the taxpayer was a company engaged in the transport industry. In claiming the investment allowance deduction the company stated that it is common practice throughout the industry for operators to recycle used truck bodies by fitting them to new cabs and chassis when the original cabs and chassis have become worn out. In some cases the effective life of a truck body is frequently three times that of a truck cab and chassis. Truck bodies often have highly specialised functions and have been designed and built originally to meet the specific requirements of particular operators. Many operators in the industry interchange bodies and cabs and chassis to meet different load and distance requirements and to satisfy particular stipulations in contracts.

Ruling

3. These assertions are particularly true, it is thought, in the heavy transport industry where it is the practice to acquire cabs and chassis so that a variety of truck bodies may be attached or affixed to them. In these circumstances the authorities would suggest that a truck cab and chassis is a unit of plant in its own right. Reference need only be made to the decision of Kitto J. in Readymix Concrete (Victoria) Pty. Ltd. v FC of T 69 ATC 4038; 1 ATR 123 where, in relation to a cement mixer, he said:

"It is not really a component of a total vehicle comprising itself and the truck, being ordinarily used for the delivery of ready mixed concrete. Notwithstanding the mode and degree of annexation the truck and the mixer are functionally separate and independent units of property."

4. Reference may also be made to Redland Tiles Pty Ltd v FC of T 71 ATC 4056; 2 ATR 189 and to 80 ATC Case M98; 24 CTBR (NS) Case 69 where the Board of Review held that ripper and carry-all were separate units of property which, except for their failure to meet the cost requirements, were eligible for investment allowance notwithstanding the fact that unless attached to a tractor each of these units of property was quite useless to the taxpayer in his business. The Board also observed that the tractor itself constituted a unit of property notwithstanding that by itself it was nothing more than a very expensive motorised conveyance for one person.

5. In the heavy transport industry, therefore, where a truck cab and chassis is so constructed that it is capable of accommodating a body not permanently or irrevocably fixed to it and readily replaceable or interchangeable, the truck cab and chassis would qualify as a unit of property expenditure on which would be eligible for the investment allowance deduction. The problem may not arise with smaller type, e.g., one tonne, trucks. It would be the exception rather than the rule, it is thought, to fit a used truck body to a new cab and chassis. It is more than likely that the whole vehicle would be replaced. Should a case arise, however, where a new cab and chassis was acquired and a used truck body fitted to it the investment allowance deduction would be available in respect of the expenditure on the new cab and chassis.

6. The allowance of an investment allowance deduction in respect of expenditure on a new truck body will need to be determined in the light of the particular facts of each case. There are some truck bodies which are clearly separate units of property, e.g., cement mixers, refrigerated milk containers, tip bodies, etc. The purchase of new truck bodies of this sort or the replacement of existing ones would give rise to an investment allowance deduction. There will be other cases, however, where it is proper to describe the complete vehicle as one unit of property, e.g., a bus. The replacement of the bus body may be more accurately characterised as a repair to the bus not involving expenditure of a capital nature and, therefore, not eligible for the investment allowance deduction. So it is also with the ordinary tray body of the smaller types of truck, e.g., the one tonne truck. It is more natural to refer to the tray body as part of the truck and to the replacement of the tray body as a repair to the truck rather than the acquisition of a new unit of property.

Commissioner of Taxation
10 September 1981

References

ATO references:
NO J153/119/10 P15 F201

Date original memo issued:
10.09.81

Subject References:
truck cabs
chassis and bodies
investment allowance

Legislative References:
ITAA 82AA

Case References:
Readymix Concrete (Victoria) Pty. Ltd. v FC of T
69 ATC 4038
1 ATR 123

Redland Tiles Pty Ltd v FC of T
71 ATC 4056
2 ATR 189
Case M98
80 ATC 689