Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Wayne Swan MP)Chapter 4 - Income tax exemption of the Endeavour Executive Award and research fellowships under the Endeavour Awards
Outline of chapter
4.1 Schedule 4 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to exempt from income tax research fellowships under the Endeavour Awards. This Schedule also amends the ITAA 1997 to exempt from income tax the Endeavour Executive Award.
Context of amendments
4.2 The Endeavour Awards scholarship program (the program) is an internationally competitive, merit-based scholarship program administered by the Department of Education, Employment and Workplace Relations. This program brings leading researchers, executives and students to Australia to undertake study, research and professional development in a broad range of disciplines and enables Australians to do the same abroad.
4.3 The Endeavour Executive Award and research fellowships under the program are awarded to postgraduate students, postdoctoral fellows, and high achievers in business, industry, education or government in Australia and participating countries. The duration of the research fellowships and the Executive Award is generally between one and six months.
4.4 Some scholarships offered under the program to recipients undertaking full-time study are currently exempt from income tax. The Endeavour Executive Award and some research fellowships under the program do not require recipients to be in full-time education and as such are not exempt from tax. These amendments ensure consistent tax treatment of all fellowships and awards offered under the program regardless of whether the awards are made for full or part-time educational pursuits.
Summary of new law
4.5 These amendments provide that, from 1 July 2007, no income tax will be paid by recipients on an Endeavour Executive Award or a research fellowship under the program. These amendments ensure consistent tax treatment of all fellowships and awards offered under the program regardless of whether the awards are made for full or part-time educational pursuits.
Comparison of key features of new law and current law
| New law | Current law |
|---|---|
| The entire amount of a research fellowship under the Endeavour Awards program is exempt from income tax. | There are three components of a research fellowship offered under the Endeavour Awards program consisting of a travel allowance, an establishment allowance and a monthly stipend.
If the recipient of a research fellowship under the Endeavour Awards program is a full-time student, all three components are exempt from income tax. If the recipient is not a full-time student, the stipend is assessable income and the allowances may be assessable income, depending on the form they take. |
| The entire amount of an Endeavour Executive Award is exempt from income tax. | The three components of an Endeavour Executive Award are a travel allowance, an establishment allowance and a monthly stipend.
As the recipients of this award are not engaged in full-time education, the stipend is assessable income and the allowances may be assessable income, depending on the form they take. |
Detailed explanation of new law
4.6 The Endeavour Awards program is an internationally competitive, merit-based scholarship program administered by the Department of Education, Employment and Workplace Relations.
4.7 Some scholarships offered under the program to undertake full-time study are currently exempt from income tax under item 2.1A in the table in section 51-10 of the ITAA 1997 and are therefore not covered by this exemption.
4.8 Under the current law, the tax treatment of the Endeavour Executive Award and some research fellowships under the Endeavour Awards scholarship program is inconsistent with other awards offered under this program, which are exempt from income tax for full-time students. Some parts of an Endeavour Executive Award and research fellowships under the Endeavour Awards are currently treated as assessable income where the recipient is not a full-time student.
4.9 This measure exempts the Endeavour Executive Award and all research fellowships under the Endeavour Awards from income tax. [Schedule 4, item 4, section 51-10]
4.10 Research fellowships currently include the:
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- Endeavour Research Fellowship;
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- Endeavour Research Fellowship for Indigenous Australians; and
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- Endeavour Australia Cheung Kong Research Fellowship.
The exemption also applies to any future research fellowships that are introduced under the Endeavour Awards scholarship program.
4.11 These amendments allow consistent income tax treatment for all recipients of an Endeavour Executive Award and research fellowships under the Endeavour Awards whether or not the recipients are full-time students.
Application and transitional provisions
4.12 These amendments apply to fellowships and awards received in 2007-08 and later income years. [Schedule 4, item 5]
Consequential amendments
4.13 Consequential amendments are made to the non-operative index that lists which income is exempt when derived by certain taxpayers. [Schedule 4, items 1 to 3, section 11-15]