AMA opposes ATO proposal to tax medical workforce scholarships

7 Mar 2017

The AMA has made a detailed submission to the Australian Taxation Office, in response to a discussion paper released by the ATO, looking at the taxation of scholarships.

The AMA argues that the proposed approach outlined in the paper will have significant unintended consequences for incentive based workforce programs that provide scholarships in return for participants agreeing to work in underserviced communities.

In particular, scholarships paid under programs like the Medical Rural Bonded Scholarship (MRBS) scheme would be subject to income tax. The MRBS is currently treated as being tax free.

In opposing the change, the AMA argues that it is contrary to good public policy for the ATO to take a position that the tax-free status of scholarships like the MRBS should be in question simply because there is a benefit to the community incorporated into the scholarship conditions through a return of service obligation.

The submissions makes a number of recommendations, highlighting that the AMA's concerns with the discussion paper could be neatly addressed by removing the consideration ‘non-commercial benefits’ when determining if a scholarship is principally for educational purposes. This would effectively make scholarships exempt from tax unless they are very specifically for the commercial benefit of a private entity. This would be consistent with the relevant provisions of the Income Tax Assessment Act 1997 and at the same time, support good public policy.