Scholarships

Do you need to pay tax on scholarships?

Receiving a scholarship can be a huge boost, not just to your education, but your quality of life too. It might mean you can afford better study equipment, don’t need to work as many hours, or provide you with a place to live.

While there are undoubtedly many benefits to receiving a scholarship, one common question students have is whether or not they need to pay tax on scholarships. In this article, we’ll delve into the details so you can apply with peace of mind.

First off – what is tax?

If you’re unfamiliar with the concept, tax is essentially a bit of money taken off the top of your income and earnings. That money then goes to the government, who uses it to provide public services and build new infrastructure, like hospitals, schools, and roads.

Nearly everyone who has a job will pay tax. There are minimum amounts you need to earn before you start paying tax though. And most of the time, your employer will automatically withhold tax from your pay, so you don’t need to worry about a thing.

So the real question is do scholarships count as income, and consequently, will some of it be taken as tax? Let’s find out.

In Australia

If you receive a scholarship in Australia, chances are it will most likely be considered exempt income (that is, you don’t pay tax on it). However, there are a few conditions to meet:

• You must be a full-time student. Unfortunately, part-time students must always declare scholarships as income.
• Your scholarship is not tax exempt if, as a condition of the scholarship, you work or will work in the future for the person or organisation funding the scholarship.
• The scholarship must be provided to you principally for educational purposes. If the scholarship or your course involves unpaid work experience, this still counts as educational.

If your scholarship is taxable, you must include it on your annual tax return. The ATO will then assess whether or not you will have any tax deducted from your scholarship payments.

If you have any concerns or questions, we suggest you get in touch with the scholarship provider or the ATO.

Ready to apply?

Keep in mind that these are all general guidelines. Whether or not you need to pay tax on scholarships will come down to your personal circumstances and the conditions of the scholarship. So if you have any doubts or concerns, make sure you talk to a professional first, whether it’s your careers advisor, someone from the university, or the tax office.

You can read more about scholarships, including application tips, and search for opportunities on our website here.