Private ruling: Income - scholarship
Published: September 2013
Ruling period: Financial year ended 30 June 2013.
Date scheme commenced: 1 July 2012.

Ruling: Q1: Is the scholarship you received assessable income? | A1: No.

Relevant facts and circumstances: The Foundation is a not for profit organisation established to provide charitable support to community groups. The university and the Foundation cooperatively provide the scholarship. The scholarship supports outstanding rural and regional students entering learning institution for the first time. The scholarship is promoted to school leavers that studied at a rural or regional school in particular areas, or mature age students who have lived in these areas for at least the past two years. Only those who have suffered some form of educational disadvantage are considered and preference is given to those who show a commitment to serving the community. The scholarship comprises an annual credit for on-campus accommodation funded by the learning institution and an annual grant funded by the Foundation (the grant) for education expenses over three years. The grant can be used to further fund the recipient's accommodation costs. The scholarship recipient agrees to meet the following conditions during the duration of the scholarship: · the recipient will stay in on-campus accommodation at the learning institution · the recipient must continue to study the course for which the scholarship has been awarded · the recipient is to meet the minimum pass requirements to satisfy the learning institution course, and · the recipient must use the grant portion of the scholarship exclusively for those specified purposes as described in their application for the grant and not for any other purpose. If the recipient fails to meet these conditions they may be required to refund amounts paid and/or no longer be entitled to any part of the scholarship. You were awarded the scholarship. You are studying a relevant course at the learning institution on a full-time basis. There is no condition that you continue to be, or will become, an employee of the person or authority making the payment. You are not party to, or entering into, a contract with the scholarship provider that is wholly or principally for labour. You can never be required under the terms of the scholarship, to provide personal services, (now or in the future) for the scholarship provider.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(1) | Income Tax Assessment Act 1997 Division 51 | Income Tax Assessment Act 1997 section 51-10 | Income Tax Assessment Act 1997 section 51-35

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that your assessable income includes income according to ordinary concepts, which is called ordinary income. Money received from a scholarship is generally considered ordinary income. Certain amounts of ordinary income are exempt from income tax if the amount is of a type listed in the tables in Division 51 of the ITAA 1997. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that the following payments are exempt from income tax if: · they are made to a full-time student at a school, college or university · they are made by way of scholarship, bursary, educational allowance or educational assistance, and · they are not subject to the exceptions set out in section 51-35 of the ITAA 1997. You are in receipt of the scholarship and are undertaking a course at the university on a full-time basis. As such, you are a full-time student at university in receipt of a scholarship. Section 51-35 of the ITAA 1997 excludes the following payments from exemption: · payments by the Commonwealth for education or training: paragraphs 51-35(a), (b) and (f) · payments made on the condition that the student will become an employee of the payer: paragraph 51-35(c) · payments made on the condition that the student will enter into a contract with the payer that is wholly or principally for the labour of the student: paragraph 51-35(d), and · payments made under a scholarship that is not provided principally for educational purposes: paragraph 51-35(e). In your case, the scholarship comprises an annual credit for on-campus accommodation funded by the university and an annual grant funded by the Foundation (the grant) for education expenses. Therefore, there are two 'payers' for the purposes of section 51-35 of the ITAA 1997 being the Foundation and the university. There are no conditions attached to the scholarship that require you to work, now or in the future, for the Foundation or the university. The scholarship is awarded only to rural and regional students who are studying a course at the university. The credit for on-campus accommodation enables the student to attend the university that gives them access to a university education. It is accepted that in providing the scholarship, the payers are doing so principally for educational purposes. The scholarship payments are therefore not excluded from exemption by paragraph 51-35(e) of the ITAA 1997. Accordingly, the scholarship you receive is exempt from income tax under item 2.1A of the table in section 51-10 of the ITAA 1997.