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Edited version of your written advice
Authorisation Number: 1051276840457
Date of advice: 1 September 2017
Ruling
Subject: Scholarship income
Question 1
Is the scholarship amount you receive from the relevant Scholarship considered exempt from income tax?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You received an amount from the Scholarship fund in early 2017.
The scholarship requirement that the recipient be studying full time was waived after consideration of your personal circumstances and you were granted a payment of half the scholarship amount for your study as a part time student.
Relevant legislative provisions
Section 6-5 of the Income Tax Assessment Act 1997
Section 6-15(2) of the Income Tax Assessment Act 1997
Section 51-10 of the Income Tax Assessment Act 1997
Section 51-35 of the Income Tax Assessment Act 1997
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).
Payments received under a scholarship are considered to be ordinary income.
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.
Your scholarship does 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.
The Commissioner has no discretion to ignore the requirement that the scholarship be full-time even where there are compelling medical or personal reasons for the student to study part-time. Accordingly your part-time scholarship is not considered to be an exempt scholarship and as such is considered assessable income.
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