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Edited version of your written advice
Authorisation Number: 1013072208575
Date of advice: 17 August 2016
Ruling
Subject: Income - Exempt Income - Scholarships
Question 1
Is the scholarship received taxable income in the hands of the recipient?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You received a scholarship.
The scholarship stated aim is to offset the living and tertiary costs associated with medical training and assist students to overcome financial barriers to studying medicine at university.
To be eligible for the scholarship the recipient needed:
• to be studying full-time towards an accredited Australian primary medical qualification,
• have a demonstrated commitment to working in rural and regional Australia in the future,
• complete their final year of medical studies, and
• obtain an intern position in a rural hospital post-graduation.
You were granted the scholarship when you were a full-time student.
You received the scholarship payment prior to your graduation.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Section 6-5
Income Tax Assessment Act 1997 - Section 51-10
Income Tax Assessment Act 1997 - Section 51-35
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (section 6-15 of the ITAA 1997).
As a general rule, money received from scholarships is considered to be ordinary income. 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,
• the taxpayer must be in receipt of a scholarship and the scholarship must be 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, the scholarship meets all of the above criteria. Consequently the scholarship you received will be exempt from income tax under section 51-10 of the ITAA 1997.