Exempt income - part time student

Is a scholarship paid to a part-time student exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. A scholarship paid to a part-time student is not exempt from tax under sections 51-10 of the ITAA 1997.

The taxpayer is enrolled as a part-time student at a university.

The taxpayer is offered a post-graduate scholarship as a part-time academic/research scholar.

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 educational assistance by a full time student at a school, college or university is exempt from income tax.

In general terms, for a scholarship to be exempt from income tax: (1) the taxpayer must be in receipt of a scholarship and the scholarship must be provided principally for educational purposes; (2) the taxpayer must be a full-time student at a school, college or university; and (3) 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.

In this case, the post-graduate scholarship is not exempt from income tax because the taxpayer is a part-time student. The taxpayer does not meet one of the essential requirements set down by section 51-10 of the ITAA 1997 that is, the taxpayer must be a full-time student at a school, college or university.

As the amount received is income according to ordinary concepts and not exempt under any provision of the ITAA 1997 the income will be assessable under section 6-5 of the ITAA 1997.