Edited version of your private ruling

Authorisation Number: 1012549367911

Ruling

Subject: International Fellowship Income

Question

Is your international fellowship income subject to income tax in Australia?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You are an Australian resident.

You have been awarded a two year research fellowship with a foreign organisation overseas.

The requirements of the fellowship are to undertake a research project at an overseas host institute.

You left Australia to take up the research fellowship.

The fellowship provides subsistence payments which are paid in monthly instalments.

The subsistence payments are mainly aimed at covering your living expenses, including health insurance.

Your subsistence payments are tax free in the overseas country.

You are a research fellow.

Fellows are not considered to be employed by their host scientific institute or fellowship provider.

Fellows are not full time students.

Fellows are neither carrying out a trade nor are they receiving money in return for a provided service.

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 15-30.

Income Tax Assessment Act 1997 Section 51-10.

Income Tax Assessment Act 1997 Section 51-35.

Income Tax Assessment Act 1997 Section 118-37.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income of a resident taxpayer includes income according to ordinary concepts, that is, ordinary income derived directly or indirectly from all sources, whether in or out of Australia during the income year.

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).

Research fellowship (scholarship) payments are ordinary income for the purposes of subsection

6-5(2) of the ITAA 1997.

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.

As you do not meet the conditions set out in section 51-10 of the ITAA 1997 due to you not being a full time student your fellowship is not exempt from income tax.

Therefore, your international fellowship income received during the relevant financial year is considered to be taxable foreign sourced income as it has been sourced from overseas.

Taxable foreign sourced income is entered into Section 20 - Foreign source income and foreign assets or property when completing a 2013 individual income tax return.