Edited version of private advice

Authorisation Number: 1051833008019

Date of advice: 29 April 2021

Ruling

Subject: Scholarship income

Question

Is the scholarship amount you received as a part time student exempt from income tax?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are studying your degree with a University.

You receive a scholarship from the University.

You were enrolled as a part time student for an intensive unit.

You did the intensive unit to finish your degree earlier.

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 has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business.

Based on case law, it can be said that ordinary income generally includes receipts that are earned, expected, relied upon, and have an element of periodicity, recurrence or regularity.

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.

Item 2.1A of the table in section 51-10 of the ITAA 1997 provides that, subject to the exceptions and special conditions contained within section 51-35 of the ITAA 1997, income received by way of a scholarship, bursary, educational allowance or education assistance by a full-time student at a school, college or university is exempt from income tax.

For the scholarship to be exempt from income tax:

•         the taxpayer must be a full-time student at a school, college or university,

•         the taxpayer must be in receipt of a scholarship and the scholarship must be provided principally for educational purposes, 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 for the intensive unit 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, as information supplied by you states that you were enrolled as a part time student for that unit, your scholarship for that unit is not considered to be an exempt scholarship and as such is considered assessable income.

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