Private ruling: Scholarship
Date of advice: 17 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2016

Ruling: Q1: Is your scholarship from a University exempt from income tax? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 51-10.

Reasons for decision: Summary: Exempt 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 during the income year. However, if an amount is exempt income, it is not included in your assessable income (section 6-15 of the ITAA 1997). Section 11-15 of the ITAA 1997 list certain types of exempt income. Included in this list is section 51-10 of the ITAA 1997 which deals with income derived by full-time students. 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. Paragraph 51-35(c) of the ITAA 1997 provides that an amount is not exempt if the payment you receive is made on the condition that you will (or will if required) become, or continue to be, an employee of the payer. Paragraph 51-35(d) of the ITAA 1997 provides that a payment by a person or an authority on the condition that the student will (or will if required) enter into, or continue to be a party to, a contract with the person or authority that is wholly or principally for the labour of the student is also not exempt. Paragraph 51-35(e) of the ITAA 1997 provides that an amount is not exempt if the scholarship payment is not provided principally for educational purposes. In your case you are currently a part time student. We acknowledge your personal circumstances, however the legislation does not provide any discretion or pro-rata exemption. The fact that you are doing substantial hours for your studies does not mean that you are regarded as a full time student for the purposes of section 51-10 of the ITAA 1997. As the Commissioner has no discretion in relation to the full time requirement under section 51-10, your scholarship payments are not exempt from income tax. Ordinary income 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. That is ordinary income includes amounts received periodically or regularly and which the recipient relies on for the maintenance of themselves and/or their dependants ( FCT v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82). It is considered that your scholarship payments are ordinary income and form part of your assessable income.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions. | Relevant facts: You are currently being awarded a Scholarship by a University. | The scholarship is normally only awarded to full time students, however part time scholarships may be awarded or approved if the student has reasons acceptable to the University that preclude full time study for part or all of the course of study. | As you were diagnosed with a medical condition, you were given approval to maintain your scholarship and continue your studies at a part time load. | You devote several hours of work a week onto your studies.