ATO Interpretative Decision
ATO ID 2002/221
Personal tax
Exemption of summer vacation scholarship income - provided for employmentFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a summer vacation scholarship exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when the scholarship is provided to give the recipient summer vacation employment with a university research group?
Decision
No. A summer vacation scholarship is not provided principally for educational purposes when the scholarship provided to give the recipient summer vacation employment with a university research group and will not be exempt under section 51-10 of the ITAA 1997.
Facts
The taxpayer, who is undertaking a full-time undergraduate course at a university, was awarded a summer vacation scholarship by the university for the duration of the university summer vacation period.
The university's stated purpose for providing the scholarship is to give recipients summer vacation employment with a research group of the university.
Reasons for Decision
Section 51-10 of the ITAA 1997 exempts from tax income received by a full-time student at a school, college or university from a scholarship, bursary educational allowance or educational assistance.
However, paragraph 51-35(e) of the ITAA 1997 excludes from exemption a payment under a scholarship where the scholarship is not provided principally for educational purposes.
As the university provided the scholarship to the taxpayer for the purposes of employment, the scholarship was not provided principally for educational purposes. Income provided by the scholarship is therefore excluded from exemption by paragraph 51-35(e) of the ITAA 1997.
Date of decision: 13 February 2002
Legislative References:
Income Tax Assessment Act 1997
section 51-10
paragraph 51-35(e)
ATO ID 2002/220
ATO ID 2002/222
Keywords
Exempt income
Scholarships, fellowships & bursaries
Date reviewed: 3 December 2013
ISSN: 1445-2782