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Edited version of your written advice
Authorisation Number: 1013121082236
Date of advice: 9 November 2016
Ruling
Subject: Deductions - repayment of scholarship income
Question
Are you able to claim a deduction for the repayment of a scholarship in the income years in which the repayments are made?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 20XX
Year ending 30 June 20YY
Year ending 30 June 20ZZ
The scheme commences on
1July 20WW
Relevant facts and circumstances
You were awarded an annual scholarship.
To receive the scholarship you were required to meet certain contractual conditions.
As you were unable to meet those contractual conditions, you are required to repay the scholarship funds.
You commenced repaying the scholarship by instalments in 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 59-30
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it.
The repayment of the scholarship income does not relate to the gaining or production of your assessable income in the years ended 30 June 20XX to 30 June 20ZZ, inclusive.
As there is no nexus between the income you will receive and the repayment of the scholarship, you are not entitled to claim a deduction for the repayment amounts in the year(s) the repayments are made.