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Edited version of your written advice
Authorisation Number: 1013080359034
Date of advice: 29 August 2016
Ruling
Subject: Scholarship income
Question
Is scholarship income you receive assessable income?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You are undertaking full-time study for a postgraduate degree at university.
You receive a scholarship for your postgraduate study.
The scholarship provides a total amount paid over two years.
The scholarship is provided principally for education purposes.
There are no conditions attached to the scholarship requiring you to be an employee of the scholarship provider.
There are no conditions attached to the scholarship requiring you to enter into a contract with the scholarship provider.
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
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.
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).
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income.
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.
Application to your circumstances
In your case, the scholarship is principally for educational purposes, there are no conditions attached to the scholarship that require you to enter into any contract or be an employee of the scholarship provider, and you are a full-time student at university. Therefore, your scholarship income is exempt from tax under section 51-10 of the ITAA 1997 and does not form part of your assessable income.
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