Edited version of private advice

Authorisation Number: 1051566409340

Date of advice: 26 August 2019

Ruling

Subject: Scholarship - assessable - not studying full-time

Question

Is the Scholarship exempt from income tax?

Answer

No

This ruling applies for the following period:

1 July 2018 to 30 June 2019

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You studied a research year (Y) for your Z at T in 20XX.

Within the Z program, Y is generally undertaken as part of the final year of studies. It is not an additional year, as in the case of most other degrees. The Z year is by application. It includes the research and writing of a thesis (which counts as X electives) under the supervision of a member of School academic staff on a topic to be approved by the Z Convenor. Students enrol in X specific subject in semester one and X subject in semester two.

You were a Z student between XX XXXX 20XX and XX XXXX 20XX in 20XX.

In addition to your Z with Y, you studied the D at T in 20XX and finished in XXXX 20XX.

On XX XXXX 20XX you applied for the A Scholarship.

On XX XXXX 20XX you were notified that you had been awarded the major scholarship worth $X over X years.

On XX XXXX 20XX and XX XXXX 20XX, you received a total lump sum payment of $X. This was backdated to XX XXXX 20XX.

After the initial lump sum you were received $X per B thereafter.

You stopped receiving scholarship payments on XX XXXX 20XX. This was in accordance with the terms of the scholarship agreement, in that you had completed all courses (Y degree and practical training). The scholarship was to be paid out for a period of X years or until the course was completed, whichever was the earlier of the two.

In total you received $X in scholarship payments between XX XXXX 20XX - XX XXXX 20XX inclusive.

The scholarship provider did not withhold tax whilst paying the scholarship.

You received Centrelink benefits for the duration of 20XX. The payments were received equivalent to a full-time student albeit you were studying at a reduced load.

You received X letters to support your continued receipt of Centrelink payments and public transport concessions.

Your letter from your specialist advised that you are not able to study full-time and that the maximum study load you can currently complete is X% of a full-time course as a reduced study load.

On XX XXXX 20XX you received an extension for your thesis submission deadline to XX XXXX 20XX.

Your letter dated XX XXXX 20XX from the university advised you were enrolled in the Z. You were studying part-time, XX% concessional study load and were granted an extension on your final elective until XX XXXX 20XX.

On XX XXXX 20XX you commenced employment with the scholarship provider.

You submitted your Z for examination on XX XXXX 20XX.

The Z degree was completed on XX XXXX 20XX and conferred (received your award) on XX XXXX 20XX.

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 (Dixon v. FC of T (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:

·   you must be in receipt of a scholarship,

·   you must be a full-time student at a school, college or university,

·   there must be no condition under the scholarship that you are required (or can be required) to become an employee of the scholarship provider (either during or after completion of your studies),

·   the terms of the scholarship do not amount to a contract with the scholarship provider that is wholly or principally for labour.

·   there must be no condition under the scholarship that you are required to provide personal services (now or in the future) for the scholarship provider (or a nominee), and

·   the scholarship must be provided principally for educational purposes.

Your scholarship does not meet one of the essential requirements set down by section 51-10 of the ITAA 1997. This requirement being 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 and must be reported in your tax return.

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