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Income from Education Scholarships, Prizes and Allowances
Last amended: 12 July 2005
Assessment of scholarship income
A scholarship is assessed as income for pension purposes for the student unless the type of scholarship, or similar payment, is specifically exempted.
'Approved' scholarships awarded outside Australia
Certain scholarships that have been approved by the Minister for Family and Community Services are not assessed for income test purposes.
For a scholarship to be an 'approved' scholarship it must:
- be awarded outside Australia, and
- not intended to be used wholly or partly to assist recipients to meet living expenses.
Examples of approved scholarships
The following are approved scholarships:
- Rotary Foundation Ambassadorial Scholarship (provided that it does not contain any component for living expenses),
- Cambridge Commonwealth Trust Fees Scholarship, and
- Scholarship awarded by Association of Mouth and Foot Painting Artists, Liechtenstein.
Scholarships, bursaries, stipends and grants awarded within Australia
A variety of scholarships, bursaries, stipends and grants are available to assist recipients to complete an academic qualification, obtain specialised training or a complete a special project. These payments are awarded within Australia and paid, at least in part, to assist with living expenses. They cannot be exempted and are assessed as income.
Examples of non-exempt scholarships
Some of the more well known scholarships that are not exempt are:
- Churchill Fellowship,
- Fullbright Scholarship,
- Direct Athletes Support Scheme,
- National Asian Language Scholarship, and
- post graduate research scholarships from most Australian universities.
Examples of exempt scholarships
The following scholarships are exempt from the income test:
- non-discretionary fee pay or fee waiver scholarships; and
- Commonwealth Learning Scholarships.
Fee pay scholarships pay course fees on behalf of the student. These are generally a set cash amount paid directly to the university on behalf of the student from a university-administered trust and may include Higher Education Contribution Scheme (HECS) charges, course fees and/or services and amenities fees.
Fee waiver scholarships are offered by universities to students as a discharge of all or part of the fees or charges otherwise associated with their course of study. They are generally designed to cover fees due on non-Commonwealth supported places and are offered as a waiver of a percentage of fees otherwise due on a particular course, rather than as a cash amount.
For scholarships to be exempt from the income test, they must be for tuition fees, either as a full or part waiver offered by an education institution, or as a full or part payment directly to the institution for those fees. The exemption will only apply to that part of the scholarship that is for tuition fees and will only cover the value of fees that would normally be charged for the course in which the student is enrolled.
Commonwealth Learning Scholarships are discretionary and assist rural, regional, low income and indigenous students. They are paid directly to the student, are merit based, non-repayable and for up to four years. There are two types:
- Commonwealth Education Costs Scholarships of $2000 per year; and
- Commonwealth Accommodation Scholarships of $4000 per year.
Regardless of any connection to education or scholarships, the value of board or lodging received for free is also exempt from the income test.
Scholarships awarded as gifts
Some scholarships, or similar payments, that are provided to students purport to be 'gifts'. In such cases a delegate needs to investigate the nature of the scholarship to determine whether the payment is a 'gift', and therefore exempt, or not a 'gift' and therefore income.
The scholarship should be counted as income if any of the following apply. The scholarship:
- is for more than one payment,
- was applied for by the student (goes to expectation of receipt),
- was based on certain qualifications, for example, residency, financial circumstances, academic performance,
- was provided as part of an incentive program,
- is for a stated purpose, for example, to meet living expenses and/or to assist with union fees and books, or
- the donor does not/has not provided 'gifts' to other people who are not students.
Scholarships awarded as prizes
Some scholarships, or similar payments, paid as one-off lump sums, in the nature of a reward or prize are NOT treated as income.
These scholarships are defined by the following characteristics. The payment:
- is unlikely to be repeated, and
- could not be reasonably expected to be received or necessarily anticipated, and
- does not represent receipt of money for services rendered directly or indirectly.
Scholarships, bursaries, stipends and grants - additional allowances
In addition to the scholarship, bursary, stipend or grant amount, recipients may be entitled to an additional allowance paid by the university that is not assessable income. The additional allowance is paid specifically for the reimbursement of specified 'out of pocket' expenses such as:
- printing, and
- other approved expenses.
To obtain this allowance, the participant is usually required to present an itemised claim for reimbursement, together with receipts.