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Edited version of your written advice
Authorisation Number: 1012953613986
Date of advice: 2 February 2016
Ruling
Subject: Assessability of foreign scholarship payments
Question and answer
Will your foreign scholarship income be assessable in Australia?
No.
This ruling applies for the following periods:
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You have been selected for a scholarship as a full-time student studying at foreign university.
The scholarship will cover your tuition, accommodation, medical care and living expenses while you are at the University.
You are required to register in person at the University in order to proceed with the course and scholarship.
The scholarship is primarily for educational purposes and does not have any conditions relating to ongoing employment and the provider has no right to your work.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 51-1
Income Tax Assessment Act 1997 Section 51-10
Income Tax Assessment Act 1997 Section 51-35
Reasons for decision
The assessable income of an Australian resident taxpayer includes ordinary income and statutory income derived from all sources during the income year.
An amount of ordinary income or statutory income is exempt from income tax under section 51-1 of the Income Tax Assessment Act 1997 (ITAA 1997) if the amount is of a type listed in the tables in Division 51, subject to any exception or special condition.
Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that an amount of income will be exempt from income tax if it is:
• made to a full-time student at a school, college or university;
• made by way of a scholarship, bursary, educational allowance or educational assistance; and
• not subject to the exceptions set out in section 51-35 of the ITAA 1997.
Section 51-35 of the ITAA 1997 excludes the following payments from exemption:
• payments by the Commonwealth for education or training: paragraphs 51-35(a), 51-35(b) and 51-35(f);
• payments made on the condition that the student will (or will if required) become an employee of the payer: paragraph 51-35(c);
• payments made on the condition that the student will (or will if required) enter into a contract with the payer that is wholly or principally for the labour of the student: paragraph 51-35(d); and
• payments made under a scholarship that is not provided principally for educational purposes: paragraph 51-35(e).
In your case, you will be a full-time student at a foreign university and will receive payments made by way of a scholarship. Further, none of the exceptions in section 51-35 of the ITAA 1997 will apply to you.
Therefore, the foreign scholarship payments you receive will be exempt from tax in Australia.
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