Class Ruling CR 2004/23
Date of effect: 1 July 2003


Class of entities or scheme: 3. The class of persons to which this Ruling applies are tertiary students who receive either a University of Canberra Postgraduate Research Scholarship or a Vice-Chancellor's Postgraduate Research Scholarship. | Qualifications: 4. The Commissioner makes this Ruling based on the precise arrangement identified in this Ruling. 5. The class of persons defined in this Ruling may rely on its contents provided the arrangement actually carried out is carried out in accordance with the arrangement described in paragraphs to 9 to 25. 6. If the arrangement actually carried out is materially different from the arrangement that is described in this Ruling: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 8. This Ruling applies from 1 July 2003. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 to 22 of Taxation Ruling TR 92/20). Furthermore, the Ruling only applies to the extent that: 9. The arrangement that is the subject of the Ruling is described below. This description is based on the following documents. These documents, or relevant parts of them, as the case may be, form part of and are to be read with this description. The relevant documents or parts of documents incorporated into this description are: 10. The University of Canberra will offer 6 Postgraduate Research Scholarships to selected students. 11. The two highest ranked applicants based on merit will be awarded the Vice-Chancellor's Postgraduate research scholarships. Another four applicants will be awarded a University of Canberra Postgraduate research scholarship. 12. The scholarships aim to encourage students with exceptional research promise to undertake a higher degree on a full time basis at the Doctoral or Masters Degree level. 13. The scholarships are available in all disciplines that are offered at the University of Canberra. 14. To be eligible for the scholarships the awardees must: 15. The selection process will be based on the approved Selection Strategy for 2004 (Resolution SBC 2003/1/1 of 14 March 2003). 16. The strategy includes: 17. The tenure of the scholarships will be for a period of three years with a possible extension of six months if there are extenuating circumstances relating to study. 18. Awardees are not required to render any service whether as an employee or under a contract for labour to the University of Canberra either during the tenure of the scholarship or upon its completion. 19. Applicants may be Australian citizens, Australian Permanent Residents, New Zealand citizens or international students. 20. The conditions of the scholarship require the awardees to: However, if their enrolment in the higher degree by research program is terminated, the scholarship is relinquished. 21. The University of Canberra Postgraduate Research Scholarships will pay a stipend equal to the amount that is paid by the Commonwealth to persons who have been awarded an Australian Postgraduate Award. The recipients of the Vice-Chancellor's Postgraduate Research Scholarship will be paid a stipend of a greater amount. 22. In addition to the stipend attached to the Vice-Chancellor's Postgraduate research scholarship and the University of Canberra postgraduate research scholarship, the awardees will receive: 23. A research training scheme place is a condition of admission for applicants for higher degrees in research. There is no payment associated with a research training scheme place. A student receiving a research training scheme place is not required to pay HECS. The HECS liability is funded by the University through an allocation that the University receives via a grant from the Commonwealth. 24. Successful awardees of the Vice-Chancellor's or University of Canberra Postgraduate research scholarships may also receive either the W J Weeden scholarship or a University of Canberra top up scholarship. 25. The W J Weeden scholarship and University of Canberra top up scholarships are subject to the same terms and conditions as the Vice-Chancellor's Postgraduate research scholarships and University of Canberra's Postgraduate research scholarships. 26. The payments described in paragraph 21, 22 and 23 of this ruling (except the waiver of full tuition fees) made to students who have been awarded either a Vice-Chancellor's Postgraduate Research Scholarship or a University of Canberra Postgraduate Research Scholarship are considered ordinary income and therefore in principle, assessable income under subsection 6-5(1) of the ITAA 1997. 27. However these payments will be exempt from income tax under Item 2.1A in the table in section 51-10 of the ITAA 1997. 28. The waived HECS liability for domestic students is not ordinary income or statutory income of the student and will not be subject to income tax under any provision of the ITAA 1997. 29. The waived tuition fees for international students are not ordinary income or statutory income of the student and will not be subject to income tax under any provision of the ITAA 1997. 30. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 31. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 32. Relevant factors in determining whether an amount is ordinary income include: | Payments: 33. Payments made under the University of Canberra postgraduate scholarships are considered to be ordinary income as they are periodical payments and are depended upon by the recipient (Federal Commissioner of Taxation v. Ranson (1989) 25 FCR 57; 89 ATC 5322; (1989) 20 ATR 1652). 34. As the payments are considered to be ordinary income, it is not necessary to consider whether they could also be statutory income. | HECS liability: 35. The waived HECS liability for domestic students awarded a research training place does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition, it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997 (statutory income). | Tuition fee waiver: 36. The tuition fee waiver provided under the University of Canberra scholarships awarded to international students does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997. | Exempt Income: 37. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. 38. Certain amounts of ordinary income are exempt from income tax under section 51-1 of the ITAA 1997 if the amount is of a type listed in Division 51 of the ITAA 1997. 39. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that payments are exempt from income tax if they are made: The three conditions are discussed below. | Are scholarship holders full-time students at a school, college or university?: 40. Yes. The scholarships will only be awarded to full-time post-graduate students enrolled at the University of Canberra. Students who are not enrolled on a full-time basis are not eligible to be awarded a scholarship. | Are the payments made by way of a scholarship, bursary, educational allowance or educational assistance?: 41. The words 'scholarship, bursary, educational allowance or educational assistance' are not defined in the ITAA 1997. The Macquarie Dictionary, 2nd Revised Edition, defines 'scholarship' as 'the sum of money or other aid granted to a scholar', and 'scholar' as 'a student; who, because of merit, etc., is granted money or other aid to pursue ... studies'. 42. Paragraphs 34 to 45 of Taxation Ruling TR 93/39 discuss the meaning of the words 'scholarship, bursary, educational allowance or educational assistance' for the purposes of the former subsection 23(z) of the Income Tax Assessment Act 1936 (ITAA 1936). Paragraph 35 of TR 93/39 states that the words are no more 'than a description of rewards for merit attained as a result of competition or selection on the basis of general criteria'. 43. In interpreting the meaning of the words 'scholarship, bursary, educational allowance or educational assistance', courts have determined that the relevant characteristics of a scholarship include: 44. The selection process for the University of Canberra Postgraduate Research Scholarships will be based on the approved Selection Strategy for 2004 (Resolution SBC 2003/1/1 of 14 March 2003). 45. It is accepted that applicants for the scholarships are subject to a competitive process and that the scholarships are granted on merit. 46. In Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6) Isaacs J said that for purposes to be educational they must provide for the giving or imparting of instruction. Rath J in Hall's case held that research conducted under supervision at a university is institutional in character and therefore educational. 47. The purpose of the University of Canberra Postgraduate Research Scholarship and the Vice-Chancellor's Postgraduate Research Scholarship is to encourage students with exceptional research promise to undertake a higher degree on a full time basis at the Doctoral or Masters Degree Level. 48. Therefore it is accepted that there is an educational purpose behind the provision of the scholarships. 49. The payments are therefore made by way of a scholarship, bursary, educational allowance or educational assistance. | Do the exceptions in section 51-35 apply?: 50. Section 51-35 of the ITAA 1997, broadly stated, excludes the following payments from exemption: | Are the payments Commonwealth education or training payments?: 51. No. The payments made under the scholarship are not of a kind covered by paragraphs 51-35(a),(b) or (f) of the ITAA 1997. | Are the payments made on the condition that the student will (or will if required) become an employee of or enter into a contract for labour with the payer?: 52. Paragraphs 51-35(c) and (d) of the ITAA 1997 exclude payments from exemption if they represent: 53. Awardees are not required to render any service to the University of Canberra whether as an employee or under a contract for their labour either during the tenure of the scholarship or upon its completion. | Are the scholarships provided principally for educational purposes?: 54. Yes, it is accepted for the purpose of paragraph 51-35(e) of the ITAA 1997 that the scholarships are provided principally for educational purposes. 55. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 10 March 2004 Not previously issued as a draft.

Ruling: 26. The payments described in paragraph 21, 22 and 23 of this ruling (except the waiver of full tuition fees) made to students who have been awarded either a Vice-Chancellor's Postgraduate Research Scholarship or a University of Canberra Postgraduate Research Scholarship are considered ordinary income and therefore in principle, assessable income under subsection 6-5(1) of the ITAA 1997. 27. However these payments will be exempt from income tax under Item 2.1A in the table in section 51-10 of the ITAA 1997. 28. The waived HECS liability for domestic students is not ordinary income or statutory income of the student and will not be subject to income tax under any provision of the ITAA 1997. 29. The waived tuition fees for international students are not ordinary income or statutory income of the student and will not be subject to income tax under any provision of the ITAA 1997. 30. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 31. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 32. Relevant factors in determining whether an amount is ordinary income include: | Payments: 33. Payments made under the University of Canberra postgraduate scholarships are considered to be ordinary income as they are periodical payments and are depended upon by the recipient (Federal Commissioner of Taxation v. Ranson (1989) 25 FCR 57; 89 ATC 5322; (1989) 20 ATR 1652). 34. As the payments are considered to be ordinary income, it is not necessary to consider whether they could also be statutory income. | HECS liability: 35. The waived HECS liability for domestic students awarded a research training place does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition, it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997 (statutory income). | Tuition fee waiver: 36. The tuition fee waiver provided under the University of Canberra scholarships awarded to international students does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997. | Exempt Income: 37. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. 38. Certain amounts of ordinary income are exempt from income tax under section 51-1 of the ITAA 1997 if the amount is of a type listed in Division 51 of the ITAA 1997. 39. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that payments are exempt from income tax if they are made: The three conditions are discussed below. | Are scholarship holders full-time students at a school, college or university?: 40. Yes. The scholarships will only be awarded to full-time post-graduate students enrolled at the University of Canberra. Students who are not enrolled on a full-time basis are not eligible to be awarded a scholarship. | Are the payments made by way of a scholarship, bursary, educational allowance or educational assistance?: 41. The words 'scholarship, bursary, educational allowance or educational assistance' are not defined in the ITAA 1997. The Macquarie Dictionary, 2nd Revised Edition, defines 'scholarship' as 'the sum of money or other aid granted to a scholar', and 'scholar' as 'a student; who, because of merit, etc., is granted money or other aid to pursue ... studies'. 42. Paragraphs 34 to 45 of Taxation Ruling TR 93/39 discuss the meaning of the words 'scholarship, bursary, educational allowance or educational assistance' for the purposes of the former subsection 23(z) of the Income Tax Assessment Act 1936 (ITAA 1936). Paragraph 35 of TR 93/39 states that the words are no more 'than a description of rewards for merit attained as a result of competition or selection on the basis of general criteria'. 43. In interpreting the meaning of the words 'scholarship, bursary, educational allowance or educational assistance', courts have determined that the relevant characteristics of a scholarship include: 44. The selection process for the University of Canberra Postgraduate Research Scholarships will be based on the approved Selection Strategy for 2004 (Resolution SBC 2003/1/1 of 14 March 2003). 45. It is accepted that applicants for the scholarships are subject to a competitive process and that the scholarships are granted on merit. 46. In Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6) Isaacs J said that for purposes to be educational they must provide for the giving or imparting of instruction. Rath J in Hall's case held that research conducted under supervision at a university is institutional in character and therefore educational. 47. The purpose of the University of Canberra Postgraduate Research Scholarship and the Vice-Chancellor's Postgraduate Research Scholarship is to encourage students with exceptional research promise to undertake a higher degree on a full time basis at the Doctoral or Masters Degree Level. 48. Therefore it is accepted that there is an educational purpose behind the provision of the scholarships. 49. The payments are therefore made by way of a scholarship, bursary, educational allowance or educational assistance. | Do the exceptions in section 51-35 apply?: 50. Section 51-35 of the ITAA 1997, broadly stated, excludes the following payments from exemption: | Are the payments Commonwealth education or training payments?: 51. No. The payments made under the scholarship are not of a kind covered by paragraphs 51-35(a),(b) or (f) of the ITAA 1997. | Are the payments made on the condition that the student will (or will if required) become an employee of or enter into a contract for labour with the payer?: 52. Paragraphs 51-35(c) and (d) of the ITAA 1997 exclude payments from exemption if they represent: 53. Awardees are not required to render any service to the University of Canberra whether as an employee or under a contract for their labour either during the tenure of the scholarship or upon its completion. | Are the scholarships provided principally for educational purposes?: 54. Yes, it is accepted for the purpose of paragraph 51-35(e) of the ITAA 1997 that the scholarships are provided principally for educational purposes. 55. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 10 March 2004 Not previously issued as a draft.


Appendix: 30. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 31. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 32. Relevant factors in determining whether an amount is ordinary income include: | Payments: 33. Payments made under the University of Canberra postgraduate scholarships are considered to be ordinary income as they are periodical payments and are depended upon by the recipient (Federal Commissioner of Taxation v. Ranson (1989) 25 FCR 57; 89 ATC 5322; (1989) 20 ATR 1652). 34. As the payments are considered to be ordinary income, it is not necessary to consider whether they could also be statutory income. | HECS liability: 35. The waived HECS liability for domestic students awarded a research training place does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition, it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997 (statutory income). | Tuition fee waiver: 36. The tuition fee waiver provided under the University of Canberra scholarships awarded to international students does not have the character of ordinary income and therefore is not assessable income under section 6-5 of the ITAA 1997. In addition it is not an amount or benefit that through the operation of the provisions of the tax law is included in assessable income under section 6-10 of the ITAA 1997. | Exempt Income: 37. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. 38. Certain amounts of ordinary income are exempt from income tax under section 51-1 of the ITAA 1997 if the amount is of a type listed in Division 51 of the ITAA 1997. 39. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that payments are exempt from income tax if they are made: The three conditions are discussed below. | Are scholarship holders full-time students at a school, college or university?: 40. Yes. The scholarships will only be awarded to full-time post-graduate students enrolled at the University of Canberra. Students who are not enrolled on a full-time basis are not eligible to be awarded a scholarship. | Are the payments made by way of a scholarship, bursary, educational allowance or educational assistance?: 41. The words 'scholarship, bursary, educational allowance or educational assistance' are not defined in the ITAA 1997. The Macquarie Dictionary, 2nd Revised Edition, defines 'scholarship' as 'the sum of money or other aid granted to a scholar', and 'scholar' as 'a student; who, because of merit, etc., is granted money or other aid to pursue ... studies'. 42. Paragraphs 34 to 45 of Taxation Ruling TR 93/39 discuss the meaning of the words 'scholarship, bursary, educational allowance or educational assistance' for the purposes of the former subsection 23(z) of the Income Tax Assessment Act 1936 (ITAA 1936). Paragraph 35 of TR 93/39 states that the words are no more 'than a description of rewards for merit attained as a result of competition or selection on the basis of general criteria'. 43. In interpreting the meaning of the words 'scholarship, bursary, educational allowance or educational assistance', courts have determined that the relevant characteristics of a scholarship include: 44. The selection process for the University of Canberra Postgraduate Research Scholarships will be based on the approved Selection Strategy for 2004 (Resolution SBC 2003/1/1 of 14 March 2003). 45. It is accepted that applicants for the scholarships are subject to a competitive process and that the scholarships are granted on merit. 46. In Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6) Isaacs J said that for purposes to be educational they must provide for the giving or imparting of instruction. Rath J in Hall's case held that research conducted under supervision at a university is institutional in character and therefore educational. 47. The purpose of the University of Canberra Postgraduate Research Scholarship and the Vice-Chancellor's Postgraduate Research Scholarship is to encourage students with exceptional research promise to undertake a higher degree on a full time basis at the Doctoral or Masters Degree Level. 48. Therefore it is accepted that there is an educational purpose behind the provision of the scholarships. 49. The payments are therefore made by way of a scholarship, bursary, educational allowance or educational assistance. | Do the exceptions in section 51-35 apply?: 50. Section 51-35 of the ITAA 1997, broadly stated, excludes the following payments from exemption: | Are the payments Commonwealth education or training payments?: 51. No. The payments made under the scholarship are not of a kind covered by paragraphs 51-35(a),(b) or (f) of the ITAA 1997. | Are the payments made on the condition that the student will (or will if required) become an employee of or enter into a contract for labour with the payer?: 52. Paragraphs 51-35(c) and (d) of the ITAA 1997 exclude payments from exemption if they represent: 53. Awardees are not required to render any service to the University of Canberra whether as an employee or under a contract for their labour either during the tenure of the scholarship or upon its completion. | Are the scholarships provided principally for educational purposes?: 54. Yes, it is accepted for the purpose of paragraph 51-35(e) of the ITAA 1997 that the scholarships are provided principally for educational purposes.


What this Class Ruling is about | The number, subject heading, and the What this Class Ruling is about (including Tax law(s), Class of persons and Qualifications sections), Date of effect, Arrangement and Ruling parts of this document are a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953. CR 2001/1 explains Class Rulings and Taxation Rulings TR 92/1 and TR 97/16 together explain when a Ruling is a 'public ruling' and how it is binding on the Commissioner. | What this Class Ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the 'tax laws' identified below apply to the defined class of persons, who take part in the arrangement to which this Ruling relates. | Tax law(s): 2. The tax laws dealt with in this Ruling are sections 6-5, 6-20, 51-1, 51-10 and 51-35 of the Income Tax Assessment Act 1997 (ITAA 1997).


Related rulings: CR 2001/1 TR 92/1 TR 92/20 TR 93/39 TR 97/16
Legislative references: ITAA 1936 23(z) ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-20 ITAA 1997 6-20(1) ITAA 1997 51-1 ITAA 1997 51-10 ITAA 1997 51-35 ITAA 1997 51-35(a) ITAA 1997 51-35(b) ITAA 1997 51-35(c) ITAA 1997 51-35(d) ITAA 1997 51-35(e) ITAA 1997 51-35(f) Copyright Act 1968 TAA 1953 Part IVAAA
Case references: Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6)