Private ruling: Assessable income - sponsorship agreement
Date of advice: 5 September 2024
Published: 14 October 2024
Ruling period: Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the annual allowances you received to cover books and other study expenses included in your assessable income? | A1: No. Your assessable income includes income according to ordinary concepts, which is called ordinary income (section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)). Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that are earned, are expected, are relied upon, or have an element of periodicity, recurrence or regularity. Your assessable income also includes the value of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you (section 15-2 of the ITAA 1997). In your case, you entered into a sponsorship agreement in relation to undertaking a university degree over a three year period in which you were provided with full tuition fees and an annual amount to cover books and other study expenses. You were also required to undertake a paid work placement with the sponsorship provider for a number of weeks. It is accepted that the payments you received were to assist you with expenses related to the study you undertook and did not have the characteristics of ordinary income. Further, as the payments can be identified as solely relating to your studies, it is accepted that the payments were not received in relation to any employment you carried out or services you rendered.

Relevant facts and circumstances: You entered into a sponsorship program with an entity in relation to a university undergraduate course over a period of three years. Under the program, you were provided with full tuition fees and an annual amount to cover books and other study expenses. You were also required to undertake a paid work placement with the sponsorship provider for a number of weeks. There was no requirement to work with the sponsorship provider on an ongoing basis after the program ended nor was there any offer of future employment under the program.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 15-2