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Edited version of private ruling
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Ruling
Subject: Scholarship
Is your scholarship paid under a work re-entry scheme exempt from tax when you study part time at a college?
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
In the 2009-10 income year you enrolled in a refresher course to enable you to re-gain your registration and return to work after some years of absence.
You received a government scholarship to assist with the costs of the course.
The course consisted of two days attendance per week for a few weeks.
You were also required to participate in practical work for a few weeks.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-15
Income Tax Assessment Act 1997 Section 51-10
Income Tax Assessment Act 1997 Section 51-35
Reasons for decision
Assessable income
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.
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income.
Exemption for scholarships
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.
Definition of full-time
The term 'full-time student' is not defined for the purposes of section 51-10 of the ITAA 1997. Accordingly, it is necessary to consider the ordinary meaning of the term. The Macquarie Dictionary version 5.0.0 defines 'full-time' as taking all the normal working hours (opposed to part-time), something which occupies a person all the time.
Your situation
Although you participated in a full-time practical placement, you were only required to attend college sessions two days per week indicating that you were a part-time student. The government scholarship that you received will not be tax exempt because you did not meet one of the essential requirements that you must be a full-time student at a school, college or university.
The amount of scholarship monies received is income according to ordinary concepts and not exempt under any provision of the ITAA 1997 and will therefore be assessable under section 6-5 of the ITAA 1997.