Centrelink and taxation
In 2020, up to $8,355 of equity and merit based scholarships will be exempt from the income test. This amount (which will be indexed each year), is allowed on top of any Commonwealth Scholarship monies also being received, and applies to all Centrelink payments with a personal, partner or parental income test.
Any scholarship amount over $8,355 will be considered personal income, and may reduce your Centrelink fortnightly payment rate for the rest of the year. Centrelink will average the excess amount (i.e. payments above $8,355), over the remaining fortnights of the period of the scholarship when determining your reduced Centrelink payment.
The $8,355 is not a per-scholarship amount, but a total which includes all payments received from eligible scholarships. This means that if you receive payments from more than one scholarship (not including Commonwealth Scholarships), you may exceed the exempt amount.
For more information refer to the online guide to Social Security.
Taxation of scholarships
For a payment to be exempt from income tax under section 51-10 of the Income Tax Assessment Act 1997, the payment must be:
- made to a full-time student of a university (enrolled in a minimum 18 credit points per semester or 36 credit points per year)
- for a scholarship, bursary, education allowance or other form of educational assistance
- not otherwise excluded under section 51-35 of the ITAA 1997.
When does section 51-35 apply?
Section 51-35 applies to remove the exempt status of a scholarship in cases where:
- the payment is made by a person or authority on condition that the student will, or will if required, become, or continue to be, an employee of the person or authority;
- the payment is made by a person or authority on 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; and
- the payment is under a scholarship where the scholarship is not provided principally for educational purposes.
It's important to note that:
- tax exempt payments must be for educational purposes to full-time students
- there is no income tax exemption for scholarships awarded to part-time students.
Further information about the tax status of your scholarship can be found by using the Australian Taxation Office (ATO) scholarship tool.