Private ruling: Fellowship income
Date of advice: 4 October 2018
Published: November 2018
Ruling period: Year ended 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Is your fellowship assessable income in Australia? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(2). | Income Tax Assessment Act 1997 section 51-10. | Income Tax Assessment Act 1997 section 51-35.

Reasons for decision: Summary: Assessable income 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. 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, and ● have an element of periodicity, recurrence or regularity. It is not necessary for all of the above indicators to be present for a receipt to be considered ordinary income. The fellowship payments you receive relate to the research services you are providing. The payments include amounts for your research and relocation expenses. The fact that you are not employed during the fellowship period does not alter the nature of the payment. Furthermore you will be receiving payments on an expected regular basis and the payments are relied up during your fellowship. Your fellowship payments are regarded as ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. The fellowship payments therefore form part of your assessable income unless it is exempted by a provision of either the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not included in assessable income. Exemption under section 51-10 of the ITAA 1997 Certain amounts of income are exempt from income tax under section 51-1 of the ITAA 1997 if the amount is of a type listed in the tables in Division 51 of the ITAA 1997. 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. Item 2.5 of the table in section 51-10 of the ITAA 1997 provides that a recipient of a research fellowship under the Endeavour Awards or an Endeavour Executive Award is exempt from income tax. You are not a full time student. Your fellowship is not paid under the Endeavour Awards. Your fellowship income is not exempt under section 51-10 of the ITAA 1997. There are no other exemptions relevant to your fellowship. Therefore your fellowship income is assessable under subsection 6-5(2) of the ITAA 1997. International tax agreements In determining liability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that the Acts are read as one. The relevant Convention operates to avoid the double taxation of income received by residents of Australia and country A. As your income is not being taxed in country A, the issue of double taxation does not arise. Australia has a taxing right in relation to your fellowship payments under the Convention. Therefore, as explained above, your fellowship payments are assessable in Australia.

Relevant facts: You are an Australian citizen currently living overseas. | You are an Australian resident for tax purposes. | You have been awarded a research fellowship with a foreign organisation. | You have the intention of returning to Australia once your fellowship is completed. | Performing research as an independent visiting fellow at the University is part of your fellowship. | As stipulated in the terms of the fellowship, you are not an employee. | The payment involves a monthly stipend plus allowances. | Your payments are tax free in the overseas country.