Edited version of private advice

Authorisation number: 1052370972479

Date of advice: 23 January 2026

Ruling

Subject: Pay as you go - education grants

Question 1

Are you required to withhold Pay As You Go (PAYG) from grant payments made to full time students under Division 12 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?

Answer 1

No.

Question 2

Are you required to withhold PAYG from grant payments made to part time students under Division 12 of Schedule 1 to the TAA?

Answer 2

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You administer five grants which are incentive programs in relation to students completing a degree in education. In relation to each grant, we note the following conditions:

1.            Grant A

•                     Financially support pre-service teachers on their final work experience placement.

•                     Recipients will receive a grant payment to assist with placement related expenses.

•                     Eligibility requirements include being enrolled in an accredited teacher's education program, undertaking final placement between the specified dates and a minimum of 15 consecutive school days of placement.

2.            Grant B

•                     Financially support students undertaking their final (work experience) practicum.

•                     Recipients will receive a grant payment to assist with expenses associated with completing their final professional experience placement.

•                     Eligibility includes being a resident of the jurisdiction, enrolling in an approved early childhood qualification, and completing at least 15 consecutive days of placement during specified periods in an approved early childhood service.

•                     If less than 15 consecutive days, the grant will be pro-rated on a per day rate.

•                     Students completing placement in certain outer regional or remote locations may receive an additional payment.

3.            Grant C

•                     Financially support Year 12 Graduates who achieve a high academic ranking and enrol in an approved initial teacher education grant.

•                     Recipients will receive a lump sum payment, or a payment for rural or remote residents, during their first semester to support study related costs.

•                     Eligibility criteria include completing secondary studies within the jurisdiction, meeting the required academic threshold, and enrolling in an approved higher education teaching qualification.

•                     The Department does not guarantee future employment to recipients.

4.            Grant D

•                     Financially support pre-service teachers completing placements in designated regional or remote state run schools.

•                     Eligibility requires enrolment in later year undergraduate teaching studies or early years of postgraduate teaching studies.

•                     Payment amounts are linked to placement duration

5.            Grant E

•                     Grant E financially supports preservice teachers completing placements in designated regional or remote state-run schools.

•                     Eligibility aligns with the same study year requirements as Grant D.

•                     Students participating in a permission to teach arrangement may be eligible if criteria are met.

•                     Payment amounts are linked to placement duration.

Assumption

Grants are not considered to be FBT benefits.

Relevant legislative provisions

Tax Administration Act 1953 section 12-1 of Schedule 1

Tax Administration Act 1953 section 12-35 of Schedule 1

Income Tax Assessment Act 1997 subsection 6-20(1)

Income Tax Assessment Act 1997 section 51-1

Income Tax Assessment Act 1997 section 51-10

Income Tax Assessment Act 1997paragraph 51-35(e)

Reasons for decision

The TAA contains the provisions which sets out payments from which amounts must be withheld.

Section 12-35 of Schedule 1 to the TAAprovides that 'an entity must withhold an amount from, salary, wages, commission, bonuses or allowances it pays to an individual as an employee'.

Section 12-1 of Schedule 1 to the TAAcontains the general exceptions on the requirement to withhold, with subsection (1) being the most applicable containing an exception for exempt income.

Subsection 6-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount of ordinary income is exempt income if it is made exempt from income tax under the ITAA 1997 or another Commonwealth law.

Certain amounts of ordinary income are exempt from income tax under section 51-1 of the ITAA 1997 where the amount is of a type listed in the tables in Division 51 of the ITAA 1997.

Item 2.1A in the table in section 51-10 of the ITAA provides that payments are exempt from income tax if:

•                     they are made to full-time students at a school, college or university;

•                     they are made by way of scholarship, bursary, educational allowance or educational assistance; and

•                     they are not subject to the exceptions set out in Section 51-35 of the ITAA.

Paragraph 51-35(e) of the ITAA contains an exception to section 51-10 if the payments are not provided principally for educational purposes.

It has been determined that the payments are provided principally for educational purposes.

Application to full-time students

As the payments have been determined to be principally for educational purposes and are provided to full-time students, they fall within the scope of section 51-10 of the ITAAmaking them exempt income.

The exceptions in section 51-35 of the ITAAdo not apply so they remain exempt income.

As the income is exempt, subsection 12-1(1) of Schedule 1 to the TAAalleviates any withholding obligations.

Therefore, PAYG is not required to be withheld from payments of the grants to full-time students.

Application to part-time students

The payments do not fall within section 51-10 of the ITAA as the recipient does not satisfy the requirement of being a full-time student.

The payment is therefore not exempt income but rather it is ordinary income and assessable income.

As it is assessable income, subsection 12-1(1) of Schedule 1 to the TAA does not apply.

However, section 12-35 of Schedule 1 to the TAA does not apply either as the payment is not of a type specified in the provision.

The payment of a scholarship/grant is not a specified payment within Division 12 of Schedule 1 to the TAA.

Therefore, PAYG is not required to be withheld from payments of the grants to part-time students.

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