Student Tax Return: Are Scholarships Taxable in Australia?
Updated: 4 days ago
Quick Answer:
Most scholarships for full-time study in Australia are tax-free, as long as you aren't required to work for the payer as a condition of receiving it. But not every student payment qualifies. Youth Allowance and Austudy are taxable income, part-time study scholarships usually aren't exempt, and work-linked or bonded scholarships are taxable too. Tax Falcon can help you work out which category yours falls into.
Student Tax Return: Are Scholarships Tax-Free?
Generally yes. A scholarship is tax-exempt if it's for full-time study, provided mainly for educational purposes, and doesn't require you to work for the payer.
The ATO's exemption applies to scholarships, bursaries, and educational allowances paid by a government body, university, or similar institution, where the main purpose is supporting your education. All three conditions generally need to be met. Miss one, and the exemption usually doesn't apply.
Do I Need to Work for the Scholarship Provider to Lose the Exemption?
Yes. If the scholarship is conditional on you providing services to the payer (during your studies or afterwards), it's treated as taxable income, not a tax-free scholarship.
This catches out students on industry-sponsored or “bonded” scholarships, for example, a scholarship that requires you to work for the sponsoring company for a set period after you graduate, or a postgraduate scholarship where part of your role includes teaching or research duties as a condition of payment. The service requirement is what changes the tax treatment, not the scholarship's name or source.
Are Part-Time Students' Scholarships Taxable?
Usually, yes. The scholarship exemption specifically requires you to be receiving full-time education, so a scholarship supporting part-time study generally doesn't qualify.
If you're studying part-time while working, a scholarship or grant you receive alongside that study is more likely to be assessable income and should be reported on your tax return, unless a specific separate exemption applies to it.
Is Youth Allowance or Austudy Taxable Income?
Yes. Youth Allowance and Austudy are taxable Centrelink payments, not tax-free scholarships, and both need to be included in your tax return.
Services Australia issues an annual Centrelink payment summary, similar to an employer's income statement, and this information generally flows through to your pre-fill. Many students assume any government study support is automatically tax-free. It isn't, and leaving it off your return creates a mismatch with Centrelink's own reporting to the ATO.
Is ABSTUDY Taxable?
It depends on the component. ABSTUDY living allowance payments are generally taxable, while some specific components (like allowances for course fees or books) can be treated differently.
Because ABSTUDY bundles several types of payments together, the taxable and non-taxable portions can vary by individual circumstances. Check your Centrelink payment summary breakdown, or ask Tax Falcon to confirm, rather than assuming the whole payment is exempt.
Are Postgraduate Research Scholarships Like RTP Stipends Taxable?
Generally no. A Research Training Program (RTP) stipend or similar postgraduate scholarship is usually tax-exempt if you're studying full-time and aren't required to provide services in return.
Where these can become taxable is if the scholarship comes with attached work duties, for example, a stipend that includes paid teaching or research assistant hours as a condition of the funding. In that case, the portion tied to services rendered is generally assessable income, even if the rest of the scholarship remains exempt.
Do I Need to Declare a Tax-Free Scholarship on My Tax Return?
No. A scholarship that meets the exemption conditions is exempt income and generally doesn't need to be included as assessable income on your tax return.
It's still worth keeping the scholarship offer letter and any correspondence on file, in case you're ever asked to confirm why it wasn't included, or if only part of a broader payment was exempt.
Payment type | Usually taxable? | Notes |
Full-time study scholarship, no work condition | No, exempt | Most university and government scholarships |
Scholarship requiring work for the payer | Yes | “Bonded” or industry-sponsored scholarships |
Part-time study scholarship | Usually yes | Full-time study is a condition of the exemption |
Youth Allowance / Austudy | Yes | Reported on your Centrelink payment summary |
ABSTUDY | Mixed | Depends on the specific component |
RTP stipend / postgraduate scholarship, no work condition | No, exempt | Becomes taxable if tied to paid teaching/research duties |
How Do I Report a Taxable Scholarship or Centrelink Payment?
Check your income statement: Centrelink payments and taxable scholarships usually appear in your pre-fill.
Add anything missing: some scholarship payers don't report electronically, so check your offer letter or payment records.
Combine with other income: taxable scholarships and Centrelink payments go in the same return as any wages or ABN income.
Submit by 31 October: the standard self-lodgement deadline applies.
Working out exactly which part of a scholarship or Centrelink payment is taxable isn't always straightforward. Tax Falcon's Student Tax Return service, from $69, has registered agents check the exemption rules against your specific scholarship and make sure everything taxable is correctly included.
For the ATO's own guidance on record-keeping and what you can claim, see ato.gov.au.
Frequently Asked Questions
Are international student scholarships taxable in Australia?
The same exemption rules generally apply regardless of citizenship. What matters is full-time study, an educational purpose, and no requirement to work for the payer, not where you're from.
What happens if I'm not sure whether my scholarship is exempt?
Check the terms of your scholarship offer for any work or service condition, review the ATO's guidance at ato.gov.au, or ask Tax Falcon to confirm before you lodge.
Do scholarships count toward the $18,200 tax-free threshold?
Only if they're taxable. An exempt scholarship isn't assessable income, so it doesn't use up any of your $18,200 threshold. A taxable scholarship does.
Does a scholarship affect my HECS-HELP repayment income?
An exempt scholarship generally isn't included in your repayment income. A taxable scholarship or Centrelink payment is, and could bring you closer to the compulsory repayment threshold.
Can I claim a tax deduction for expenses paid for by my scholarship?
Generally no. You can't claim a deduction for a cost that was covered by tax-exempt income, since you didn't genuinely bear that cost yourself against your other assessable income.
Not sure if your scholarship or Centrelink payment needs to go on your return? Start My Return with Tax Falcon's Student Tax Return service, from $69, and let its registered agents check it for you.
