Private ruling: Exempt income -scholarships
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are the scholarships that you have received in the 2013-14 income year exempt from tax? | A1: Yes.

Relevant facts and circumstances: You are enrolled in a course of study. You were awarded a number of scholarships for the purpose of undertaking full-time study abroad. There were no conditions attached to the scholarships that required you to work for the university at that time or in the future. The scholarships were paid principally for educational purposes. For the period that you were studying abroad, you were enrolled as a full-time student.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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, whether in or out of Australia, during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer. 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 education purposes and, • there must be no condition that the taxpayer be an employee of the scholarship provider or enter into any contract with scholarship provider that is wholly or principally for labour. In your case, you were enrolled as a full-time student when you were awarded two scholarships which were principally for educational purposes and there were no conditions attached that required you to work at that time or in the near future for the provider. As you have satisfied all the requirements, your scholarship income is exempt from tax.