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Ruling
Subject: Scholarship
Question
Is the scholarship you will receive for full time study through an Australian university exempt from tax?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You were successful in your application for a scholarship.
It is a full time scholarship and payments are made fortnightly throughout the university semester.
You intend to study full time at university.
There are no conditions attached to the scholarship that require you to work for the department issuing the scholarship upon completing your studies.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5,
Income Tax Assessment Act 1997 section 51-10 and
Income Tax Assessment Act 1997 section 51-35.
Reasons for decision
Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income).
Scholarship payments are generally treated as ordinary income due to the periodical nature of the payments (FC of T v. Ranson (1989) 90 ALR 533, (1989) 20 ATR 1652, 89 ATC 5322).
However, 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, they must be in receipt of a scholarship that is 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.
In your case you will receive a scholarship for educational purposes and intend to study full time. There are no conditions attached to the scholarship that require you to work for the scholarship provider. Therefore, the scholarship income that you will receive is exempt from tax.