Private ruling: Scholarships
Date of advice: 17 September 2019
Published: November 2019
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the scholarship received, be considered exempt income in the hands of the recipient? | A1: No

Relevant facts and circumstances: 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 were completing a course at the University. You were granted a scholarship during the 20XX financial year through the university. The scholarship offered support the undertaking of higher degree research program to assist with living costs. You received a letter from the university advising that because your attendance was being reduced to a part time basis, this meant the award would no longer be tax exempt. You are not currently a full time student Your medical practitioner has stated your medical condition has prevented you from working or studying fulltime. Complications associated with a lifelong medical condition, has forced you to reduce your attendance hours at the university to part time. Due to your medical condition and associated complications you were advised by faculty and your doctor to reduce your attendance hours to part-time.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997 | Section 6-15(2) of the Income Tax Assessment Act 1997 | Section 51-10 of the Income Tax Assessment Act 1997 | Section 51-35 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes income according to ordinary concepts, that is, ordinary income. Ordinary income is generally considered to include: ● amounts received in return for personal services, whether received in the capacity of an employee or otherwise, and ● amounts received periodically or regularly and which the recipient relies on for the maintenance of themselves and/or their dependants ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540). Payments received under a scholarship are considered to be ordinary income. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income. As a general rule, money received from scholarships, is considered to be 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. Your scholarship does not meet one of the essential requirements set down by section 51-10 of the ITAA 1997 that is, that you must be a full-time student at a school, college or university. The Commissioner has no discretion to ignore the requirement that the scholarship be full-time even where there are compelling medical or personal reasons for the student to study part-time. Accordingly as information supplied by you states that you are not a fulltime student your scholarship is not considered to be an exempt scholarship and as such is considered assessable income.