ATO Interpretative Decision
ATO ID 2002/220
Personal tax
Exemption of summer vacation scholarship income - provided for researchFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 purpose of the scholarship is to enable the recipient to engage in and gain experience in research?
Decision
Yes. A summer vacation scholarship is provided principally for educational purposes when the purpose of the scholarship is to enable the recipient to engage in and gain experience in research and is exempt from tax 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.
The university's stated purpose in providing the scholarship is to assist recipients to engage in and gain experience in research during the university summer vacation period.
A member of the academic staff or a post-graduate student supervised the taxpayer's research.
Reasons for Decision
Section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) exempts from tax income which a full-time student at a school, college or university receives from a scholarship, bursary educational allowance or educational assistance.
However, paragraph 51-35(e) of the ITAA 1997excludes from exemption a payment under a scholarship where the scholarship is not provided principally for educational purposes.
In Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6) Isaacs J said that for purposes to be educational they must provide for the giving or imparting of instruction. Rath J in FC of T v. Hall (1975) 5 ATR 450; 75 ATC 4156 held that research conducted under supervision at a university is instructional in character and therefore educational.
As the university provided the scholarship to the taxpayer for the purposes of engaging in and gaining experience in research, the scholarship was provided principally for educational purposes. Income provided by the scholarship is therefore exempt under section 51-10 of the ITAA 1997.
Date of decision: 13 February 2002
Legislative References:
Income Tax Assessment Act 1997
section 51-10
paragraph 51-35(e)
Case References:
Chesterman v. Federal Commissioner of Taxation
32 CLR 362
5 ATR 450
75 ATC 4156 Related ATO Interpretative Decisions
ATO ID 2002/221
ATO ID 2002/222 ATO Interpretative Decisions overturned by this decision
ATO ID 2001/530
Keywords
Exempt income
Scholarships, fellowships & bursaries
ISSN: 1445-2782