Edited version of private advice

Authorisation Number: 1052262496139

Date of advice: 14 June 2024

Ruling

Subject: Scholarships

Question

Is my scholarship tax exempt as my reason for studying part-time was not a choice of my own but a result of an injury sustained?

Answer

No.

This ruling applies for the following periods:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

In the 20YY income year you were receiving workers compensation as a result of an injury sustained within your previous employment.

You were deemed medically unfit for full time study or work.

You are a part time student.

You are studying a degree at an Australian University.

You have provided a copy of the agreement between you (the Recipient), the sponsor and the Australian University concerning the Award, which lists the following:

•         the objective of the Award is to support individuals wishing to enter the industry but lack the means to do so.

•         the recipient is responsible for making payment of all tuition fees, books, study materials, accommodation and all remaining costs of study.

The agreement also lists the conditions of the Award.

In XXXX 20YY, you received the Award. You received permission from the University to pro-rata this scholarship payment on a part-time basis.

You had insufficient subjects left to alter your course load to full-time study.

You received a total amount of $XX in the 20YY-YY income year from the scholarship payment.

The scholarship does not involve a guarantee of further employment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 11-15

Income Tax Assessment Act 1997 Section 51-10

Income Tax Assessment Act 1997 Section 51-35

Reasons for decision

Where you receive an amount that is exempt income, you do not include this in your assessable income (section 6-15 of the ITAA 1997).

As a general rule, money received from scholarships is ordinary income. However, section 51-10 of the ITAA 1997 provides that, subject to some exemptions and special conditions, 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:

•         you must be a full-time student at a school, college or university;

•         you must receive a scholarship and the scholarship must be provided principally for educational purposes; and

•         there must be no condition that you be an employee of the scholarship provider or enter into any contract with the scholarship provider that is wholly or principally for labour.

ATO ID 2002/222 Personal Tax: Exemption of summer vacation scholarship income - meaning of full-time student considers the circumstances of a full-time student receiving scholarship income over a part time summer vacation period. The student in this case was classified as a full-time undergraduate student while studying part time over the summer vacation, which did not alter their status as a full-time undergraduate student.

You are not a full-time student enrolled at a university, thereby not satisfying the first requirement for an exemption from income tax.

Application to your circumstances

Your situation differs from ATO ID 2002/222 as you are classified as a part-time student. While your reasons for studying part time are recognised, there is no flexibility to extend the provision to exempt part-time students. You have not met the necessary criteria for the scholarship to be considered exempt income, the amount you received from the Award is assessable income.