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Edited version of your written advice
Authorisation Number: 1012875735410
Date of advice: 9 September 2015
Ruling
Subject: Scholarship Income
You want to know if your scholarship is assessable under section 6-5 of the Income Tax Assessment Act 1997.
Question
Is the scholarship you receive assessable income?
Answer
No.
This ruling applies for the following period(s)
Year ended 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
You commenced full-time studies at a University.
When you started your full-time studies you were awarded a scholarship.
You receive fortnightly amounts from your scholarship which is to pay for tuition fees and a small living allowance.
The only condition for receiving the scholarship is that you are to be a full time student at the University and taking part in an eligible degree.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 51-10
Income Tax Assessment Act 1997 Section 51-35
Reasons for decision
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.
In general terms ordinary income is generally considered to include:
• amounts received in return for personal services, whether received in the capacity of an employee or otherwise, and
• 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).
Payments received under a scholarship are considered to be ordinary income. However, 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 you are a full-time student at a school, university or college; as stated in your scholarship you are receiving your scholarship to assist with tuition fees and a living allowance; and the only condition set out in your scholarship is that you be a full-time student who is part of an eligible program.
Your scholarship meets the requirements for exemption and therefore no tax needs to be paid in regards to it.
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