Edited version of your written advice

Authorisation Number: 1051492170592

Date of advice: 21 March 2019

Subject: Scholarship

Question

Is the Health Workforce Scholarship delivered by the Fund taxable?

Answer

Yes

This ruling applies for the following period:

The period ending 30 June 2021

The scheme commences on:

XX February 20XX

Relevant facts and circumstances

You are employed under contract to 30 June 2019.

You applied for and were granted a Scholarship.

Your payment has been received.

The payment had no PAYG withheld.

You are not a full time student.

By accepting the funding you must use upgraded skills to enhance the primary health care services offered.

A Return of Service Obligation must be completed 12 months effective from the completion of the funding period.

Part of the study will be unpaid work placements to be completed during the 2 year course.

The Scholarship does not guarantee employment with the provider or any related entity.

The aim of programme is to improve access to health services needed in rural and remote areas.

Under the contract you are required to use your upgraded skills to enhance the primary health care services offered in your location.

If you do not complete any of the requirements of the contract you will be required to repay the funds provided.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

Section 6-15(2) of the Income Tax Assessment Act 1997

Section 51-10 of the Income Tax Assessment Act 1997

Section 51-35 of the Income Tax Assessment Act 1997

Reasons for decision

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.

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).

Payments received under a scholarship are considered to be ordinary income.

Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income.

As a general rule, money received from scholarships is considered to be ordinary income.

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.

Your scholarship does not meet one of the essential requirements set down by section 51-10 of the ITAA 1997 that is, that you must be a full-time student at a school, college or university.

The Commissioner has no discretion to ignore the requirement that the scholarship be full-time even where there are compelling medical or personal reasons for the student to study part-time. Accordingly as information supplied by you states that you are not a fulltime student your scholarship is not considered to be an exempt scholarship and as such is considered assessable income.