ATO ID 2002/221: Exemption of summer vacation scholarship income - provided for employment
Date of decision: 13 February 2002
Business line: Small Business/Individual Taxpayers

Issue
Is a summer vacation scholarship exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when the scholarship is provided to give the recipient summer vacation employment with a university research group?

Decision
No. A summer vacation scholarship is not provided principally for educational purposes when the scholarship provided to give the recipient summer vacation employment with a university research group and will not be exempt under section 51-10 of the ITAA 1997.

Facts
The taxpayer, who is undertaking a full-time undergraduate course at a university, was awarded a summer vacation scholarship by the university for the duration of the university summer vacation period. The university's stated purpose for providing the scholarship is to give recipients summer vacation employment with a research group of the university.

Reasons for decision
Summary: Section 51-10 of the ITAA 1997 exempts from tax income received by a full-time student at a school, college or university from a scholarship, bursary educational allowance or educational assistance. However, paragraph 51-35(e) of the ITAA 1997 excludes from exemption a payment under a scholarship where the scholarship is not provided principally for educational purposes. As the university provided the scholarship to the taxpayer for the purposes of employment, the scholarship was not provided principally for educational purposes. Income provided by the scholarship is therefore excluded from exemption by paragraph 51-35(e) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 51-10 paragraph 51-35(e)
Related ATO interpretative decisions: ATO ID 2002/220 | ATO ID 2002/222
Subject references: Exempt income Scholarships, fellowships & bursaries