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Ruling

Subject: Scholarship income

Question 1:

Is the scholarship income you received in the 2011-12 financial year taxable?

Answer:

Yes

This ruling applies for the following period

Year ending 30 June 2012

The scheme commences on

1 July 2011

Relevant facts and circumstances

You are employed on a full-time basis.

You have received a lump sum scholarship payment to cover the cost of course fees in completing a course of education. The course of education is undertaken on a part-time basis.

The payment is not an ongoing payment to cover your living expenses and was not taxed.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 6-15(2)

Income Tax Assessment Act 1997 Section 51-10

Reasons for decision

Assessable income 

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes income according to ordinary concepts, that is, ordinary income. 

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). 

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income. 

Exemption for scholarships 

Section 51-10 of the ITAA 1997 provides, subject to some exceptions listed in section 51-35 of that Act, that a scholarship, bursary, educational 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. 

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, your scholarship is not exempt from income tax because you are a part-time student. You do not meet one of the essential requirements set down by section 51-10 of the ITAA 1997, that is, that you must be a full-time student at a school, college or university. 

As your scholarship payment is not exempt under the provisions of the income tax law, your part-time scholarship is assessable income under section 6-5 of the ITAA 1997. The scholarship payments are therefore included in your taxable income.

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