ATO Interpretative Decision

ATO ID 2001/218

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a stipend received by the taxpayer under a research fellowship assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The stipend received by the taxpayer under a research fellowship is assessable income under section 6-5 of the ITAA 1997.

Facts

The taxpayer will receive a Research Fellowship paid by an institution on behalf of a Research Fund.

The conditions of the Fellowship require that the taxpayer:

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use the Fellowship for full time clinical research;

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provide progress reports to the Fund if requested;

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publish in scientific journals any new methods or findings arising from the research;

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notify the Fund of any intellectual property developed during the course of the Fellowship; and

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establish an association with the institution upon completion of the Fellowship.

The taxpayer will be paid an annual award that will be paid monthly, in advance, in the form of a stipend. The stipend is paid to cover all expenses associated with the Fellowship including salary, travel, relocation costs and items required for research.

The research project will be conducted at a hospital and is not for the awarding of a higher level post-graduate degree.

Reasons for Decision

Section 6-5 of the ITAA 1997 includes amounts called 'ordinary income' in the assessable income of a taxpayer.

'Ordinary income' is generally considered to include:

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amounts received in return for personal services, whether received in the capacity of an employee or otherwise;

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amounts received periodically or regularly and which the recipient relies on for the maintenance of themselves and/or their dependants (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540).

While the taxpayer is not receiving the Fellowship in return for his or her personal services, it is considered that the Fellowship is 'income according to ordinary concepts' as it is intended to cover all expenses that the taxpayer will incur during the course of the Fellowship, will be paid periodically and will be used for his or her maintenance.

The Fellowship payments therefore form part of the taxpayer's assessable income unless it is exempted by a provision of either the Income Tax Assessment Act 1936 or the ITAA 1997.

Section 51-10 of the ITAA 1997 provides, subject to some exceptions, that a scholarship, bursary education allowance or educational assistance payment is exempt from income tax if it is paid to a full time student at a school, college or university. As the Fellowship will not be paid to the taxpayer in his or her capacity as a full-time student at a school, college or university it is not exempt under this provision.

Legislative References:
Income Tax Assessment Act 1997
   section 6-5
   section 51-10

Case References:
Federal Commissioner of Taxation v. Dixon
   (1952) 86 CLR 540

Keywords
Scholarships, fellowships & bursaries

Business Line:  Small Business/Individual Taxpayers

Date of publication:  21 August 2001

ISSN: 1445-2782