Edited version of private advice

Authorisation Number: 1052387841423

NOTICE

This is an edited version of a revised private ruling. It replaces the edited version of the private ruling with the authorisation number 1052351384951.

Date of advice: 23 April 2025

Ruling

Subject: Scholarship income - part-time

Question 1

Is your part-time scholarship exempt from income tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

No.

You are in receipt of scholarship income.

You do not meet the conditions set out in section 51-10 of the ITAA 1997 which must be met in order for scholarship income to be exempt from income tax.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a part-time student at a University.

On DD MM 20XX, you were offered a scholarship by the University as a part-time student.

The scholarship amounts will be paid to you in bi-annual instalments for up to 4 years.

The scholarship is for educational purposes.

The scholarship does not require employment, labour or guarantee future employment but does allow you the right to work while being a recipient of the scholarship.

The scholarship conditions are to make satisfactory progress and stay enrolled in an undergraduate degree at the University.

The scholarship was awarded to you based solely on equity grounds.

You are unable to pursue full-time study due to your disability.

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).

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.

While you are not receiving the scholarship in return for your personal services, it is considered that the scholarship is ordinary income as it will be paid periodically or regularly and will be used for your maintenance.

The scholarship payments therefore form part of your assessable income unless they are exempted by the income tax law.

In your case, your scholarship is not exempt from income tax because you are a part-time student. You do 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.

As your scholarship payments are income according to ordinary concepts and are not exempt under the provisions of the income tax law, your part-time scholarship is assessable income under section 6-5 of the ITAA 1997. The scholarship payments are therefore included in your taxable income.

Your personal circumstances

Whilst we accept that you are studying part-time as you are not capable of full-time study due to your disability, the income tax law specifically limits the tax exemption of certain scholarships to full-time students. No such concession is available to part-time students under the income tax law.

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