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Edited version of private ruling
Authorisation Number: 1011639800159
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Ruling
Subject: Assessable income - allowance
Are you assessable on the living allowance portion of a research grant?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are an academic at a University
You were on a research sabbatical and spent time overseas.
You were paid a grant in relation to a research project. The grant consisted of reimbursement of your flights and travel insurance and a living allowance.
The grant was awarded under a competitive grant funding scheme which is open to academics around Australia.
You incurred work related expenses in excess of the living allowance given to you.
A condition of the grant is that you submit two reports of your visit overseas.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-15(2)
Income Tax Assessment Act 1997 Section 11-15
Income Tax Assessment Act 1997 Section 51-10
Income Tax Assessment Act 1997 Section 51-35
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
'Ordinary income' is generally considered to include:
· amounts received in return for personal services, whether received in the capacity of an employee or otherwise
· 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; (1952) 10 ATD 82; (1952) 5 AITR 443; (1952) 10 ATD 82).
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-10 of the ITAA 1997, which deals with income from scholarship, bursary, other educational allowance or education assistance.
Item 2.1A of the table in section 51-10 of the ITAA 1997 provides that, subject to the exceptions and special conditions contained within section 51-35 of the ITAA 1997, income received by way of a scholarship, bursary, educational allowance or educational assistance by a full time student at a school, college or university is exempt from income tax.
In general terms, for a scholarship to be exempt from income tax:
· the taxpayer must be in receipt of a scholarship and the scholarship must be provided principally for educational purposes
· the taxpayer must be a full-time student at a school, college or university, and
· there must be no condition that the taxpayer be an employee of the scholarship provider or enter into any contract with the scholarship provider that is wholly or principally for labour.
In your case, you have been awarded a research grant which includes your airfares overseas and a living allowance. It is accepted that the grant is primarily for educational purposes and that there is no condition that you be an employee of the scholarship provider. However, you are not enrolled as a full-time student.
While you are not receiving the research grant in return for your personal services directly (although there is the condition to produce two reports), it is considered that the allowance is still 'income according to ordinary concepts' as the funds are available to be used to cover the expenses that you will incur during research project.
As the research grant will not be paid to you in your capacity as a full-time student at a school, college or university, the living allowance is not exempt from income tax under section 51-10 of the ITAA 1997. Therefore, as the amount received is income according to ordinary concepts, it should be included in your assessable income.
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