ATO Interpretative Decision
ATO ID 2002/834 (Withdrawn)
Income Tax
Study grant - Employee on leave without payFOI status: may be released
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This ATO ID is a straight application of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 18 November 2005
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the study grant received by the taxpayer from their employer while on leave without pay exempt from income tax under section 51-10 of the Income Tax Assessment Act 1997 ('ITAA 1997')?
Decision
No. The study grant received by the taxpayer from their employer while on leave without pay is not exempt from income tax under section 51-10 of the ITAA 1997.
Facts
The taxpayer is a full time employee who has enrolled as a full time post graduate student at a university. The study has been endorsed under the employer's ongoing career development and performance management system.
The taxpayer has been given leave without pay and awarded a lump sum study grant by their employer.
The study grant is part of the Studies Assistance program of the employer. The guidelines for the grant state that it is only available to current employees enrolled in full time study at an educational institution. The employee must go on leave without pay during which time the employee will retain all entitlements.
There is an expectation that the taxpayer will return to work after the study and may be required to work for the employer during term breaks.
Reasons for Decision
Item 2.1A of the table in section 51-10 of the ITAA1997 provides that if a taxpayer is a full time student at a school, college or university then a scholarship, bursary, educational allowance or educational assistance they receive is exempt from tax, except where an exclusion in section 51-35 of the ITAA 1997 applies.
Paragraph 51-35(c) of the ITAA 1997 states that a payment to or on behalf of a full time student, by a person or an authority on the condition that the student will (or will if required) enter into, or continue to be an employee of the person or authority, is not exempt from income tax under Item 2.1A of the table in section 51-10 of the ITAA 1997.
The terms of the study grant awarded provide that it is a condition that the taxpayer will take leave without pay, retaining all entitlements as an employee during the study period and may be required to work during term breaks. The taxpayer is also expected to return to work after the period of leave. An employee taxpayer on leave without pay continues to be an employee (Sykes v. Cleary (No 2) 176 CLR 77).
As the study grant is awarded on the basis that the taxpayer continues to be an employee on leave without pay, paragraph 51-35(c) of the ITAA 1997 applies and the income is not exempt from income tax under Item 2.1A of the table in section 51-10 of the ITAA 1997.
Date of decision: 13 August 2002Year of income: Year ending 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 51-10
section 51-35
paragraph 51-35(c)
Case References:
Sykes v. Cleary (No 2)
(1992) 176 CLR 77
Keywords
Scholarships, fellowships & bursaries
Grants of financial assistance & funding
ISSN: 1445-2782
| Date: | Version: | |
| 13 August 2002 | Original statement | |
| You are here → | 18 November 2005 | Archived |