Private ruling: Assessable income
Date of advice: 19 September 2025
Published: 3 November 2025
Ruling period: Year ended 30 June 20xx | Year ended 30 June 20xx
Date scheme commenced: DDMMYY

Ruling: Q1: Is the amount you received under the Grant tax exempt income? | A1: No.

Relevant facts and circumstances: You are a professional. You are receiving a Trainee Grant. You made an application for the Trainee grant in a previous year. There were several eligibility criteria for the grant. The grant was offered with the purpose of increasing the number of professionals, and to support trainees to complete their studies. The Grants Program has the aim of increasing numbers of professionals and provide financial support to undertake multiple compulsory exams in training programs. Successful applicant may spend the grant amount on items or activities that supports their training. The requirements to keep the grant are: • Secured, commenced, and undertaking a training placement/term • Remain enrolled in a training program • Maintain a valid working visa • Maintain current professional registration The grant is paid in instalments over multiple years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | 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: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year, except if an amount is exempt income (section 6-15). Section 11-15 of the ITAA 1997 lists certain types of exempt income, including Item 2.1A of the table in section 51-10, which makes exempt from income tax amounts paid as a scholarship, bursary, educational allowance, or educational assistance to a full-time student at a school, college, or university, subject to exceptions and conditions listed in section 51-35. For a scholarship, bursary, or other educational allowance to be exempt from income tax it must be provided principally for educational purposes. It is not enough that an educational purpose is a by-product or incidental purpose of the scholarship. In determining the purpose of the scholarship, bursary or other educational allowance it is the purpose of the provider of the relevant payment and not the student that is paramount. Section 51-35 of the ITAA 1997 states: The following payments made to or on behalf of a full-time student at a school, college or university are not exempt from income tax under item 2.1A of the table in section 51-10: a) a payment by the Commonwealth for assistance for secondary education or in connection with education of isolated children; b) a Commonwealth education or training payment; c) a payment by an entity or authority on the condition that the student will (or will if required) become, or continue to be, an employee of the entity or authority; d) a payment by an entity or authority on the condition that the student will (or will if required) enter, or continue to be a party to, a contract with the entity or authority that is wholly or principally for the labour of the student; e) a payment under a scholarship where the scholarship is not provided principally for educational purposes; f) an education entry payment under Part 2.13A of the Social Security Act 1991. Paragraph 51-35(e) specifies the following is not exempt under section 51-10: g) a payment under a scholarship where the scholarship is not provided principally for educational purposes. We consider the relevant exception to your circumstances to be: • a payment under a scholarship where the scholarship is not provided principally for educational purposes. • Scholarship not provided principally for educational purposes. To be exempt from income tax, the law specifies that the scholarship must be provided principally for educational purposes. This means there can be collateral advantages so long as the primary purpose is for educational purposes. It is not enough that an educational purpose is a by-product or incidental purpose of the scholarship. In determining the purpose of the scholarship, bursary, or other educational allowance it is the purpose of the provider of the relevant payment and not the student that is paramount. In FCT v. Hall (1975) 6 ALR 457; 75 ATC 4156; (1975) 5 ATR 450 (Hall's case) the taxpayer was offered a fellowship by the Asthma Foundation of Tasmania on the basis that he would undertake work in relation to a respiratory survey that the foundation was linked to. He then registered as a candidate for a Doctor of Medicine with the University of NSW with the basis of his doctorate research project being the respiratory survey. He received a scholarship from the university with funds provided by the foundation. The scholarship did not qualify for exemption under s 23(z) of Income Tax Assessment Act 1936 (predecessor to section 51-35) as the scholarship was not provided for educational purposes. On the evidence, the NSW Supreme Court found that the purpose of the foundation in providing the scholarship was not for the education of the recipient, but for the purposes of the foundation. Provider is not necessarily the payer. In relation to the provision of the scholarship, the 'provider' is not necessarily the payer. Where a party other than educational institution 'funds' the scholarship and the student's activities have some relationship or connection to that party providing the funds, such as working with or for the provider, or working towards outcomes potentially beneficial to the provider, the 'funder' can be the provider for the purposes of applying paragraph (e) and analysing the 'purpose' of that party, rather than the payer (Hall's case). Principal purpose A 'principal purpose' need not involve commercial benefits. For example, in a government program for a bonded scholarship, the fact that there is an intended work outcome such as geographical placement, means that the principal purpose of the provider of the scholarship is not one (principally) of providing education. Rather the principal purpose is one of ensuring that certain activities are provided in a particular area by the former student, consistent with the main purpose of the government, being its policy intent, and not providing education to a particular student or students. | Detailed Reasoning - Application to your circumstances: In your case you entered into the grant agreement knowing that you were required to maintain your enrolment as a trainee during the relevant years. The scholarship provider established the Grants Program with the aim of increasing numbers of professional trainees and provide financial support to undertake multiple compulsory exams in training programs. It is considered that the principal purpose for providing the grant is not for education purposes, it is to ensure a commitment of service in an approved area from the recipient. The scholarship provider offers the grants to top up a trainee's wages and to assist with compulsory exams. Therefore, paragraph 51-35(e) of the ITAA 1997 will apply to exclude the payment of the grant from being exempt. You must include this grant in your assessable income in your tax return.