Private ruling: Scholarship income
Date of advice: 21 June 2018
Published: August 2018
Ruling period: Income year ended 30 June 20xx | Income year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Will the scholarship you receive be assessable income? | A1: No

Relevant facts and circumstances: You applied for a scholarship to a university. The scholarship is paid to a person for the purpose of studying full time at the university for 12 months. You were eligible to apply for the scholarship. You are not an employee of the scholarship provider. You are not required to become an employee of the scholarship provider under the conditions of the scholarship. The terms of the scholarship do not amount to a contract that is for your labour. You will not be required under the terms of the scholarship to provide personal services for the scholarship provider. You have been awarded the scholarship, but have not actually received the funds yet. The funds will not be accessed by you until you commence the course of full time study, however you may be required to pay some or all of the tuition fees in advance. You now have a student number allocated from the university. Once you notify the scholarship provider that you have been accepted into the program, the funds will be released to you. You are not currently a full time student. You are currently employed full time, and will be taking 12 months leave without pay to attend the course. You will return to your full time employment at the conclusion of the course. The scholarship will become tenable once you have obtained entry to the university and to an appropriate College to read for the degree. You will be choosing a number of subjects and you will be studying these subjects full time for the year. You will be studying full time for the duration of the course, and will not be seeking any other employment during this time. There are no other options for when this course commences.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 51-10 Further issues for you to consider | NA

Reasons for decision: Detailed Reasoning - Scholarship Income: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (section 6-15 of the ITAA 1997). As a general rule, money received from scholarships is 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. In your circumstance the scholarship meets all of the above criteria; even though the scholarship was awarded to you before you became a full time student, it was awarded conditional to you being a full time student. Consequently the scholarship you received will be exempt from income tax under section 51-10 of the ITAA 1997.