Scholarships open doors. They can transform your education, reduce financial stress, and free up time that you’d otherwise spend working part-time jobs. But there’s a question that catches many students off guard: will you need to pay tax on that scholarship money?
Whether you’re studying in Australia or somewhere else in the world, we’ll walk you through what you need to know about scholarships and tax.
Understanding tax in simple terms
Before we dive into scholarships specifically, let’s demystify tax itself.
Tax is money collected by governments to fund the services we all depend on. Roads you travel on, hospitals that care for you, and schools where you learn are all funded through taxation. It’s essentially everyone chipping in for the common good.
Most people pay tax on their income, but there are minimum amounts you need to earn before you start paying tax. And most of the time, your employer will automatically withhold tax from your pay, so you don’t need to worry about a thing.
Scholarships and tax rules
But scholarships aren’t technically earnings, 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
The good news for Australian students is that most scholarships won’t attract tax as long as you’re a full time student. They’re typically classified as exempt income, meaning you keep every cent.
Unfortunately, part-time students must always declare scholarships as income. And 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.
Importantly, the scholarship must primarily support your education. If the scholarship offers work experience alongside your studies, it’s probably still exempt. But if you’re essentially being paid to work rather than study, different rules may apply.
If you have any concerns or questions, we suggest you get in touch with the scholarship provider or the Australian Taxation Office for advice.
In New Zealand
New Zealand takes a straightforward approach. The Inland Revenue Department states that “scholarships or bursaries for attendance at an educational institution are exempt income”. Simple as that.
Your scholarship can cover tuition fees, accommodation, living expenses, textbooks, travel to and from your institution, and equipment essential for study (yes, that includes your laptop).
However, if you spend scholarship money on non-study items, you’ll need to declare that portion as income. Note that scholarships are always counted as income for Student Allowance purposes, even though they’re tax-exempt.
Questions? Contact your scholarship provider or Inland Revenue – Te Tari Taake directly for help.
In the United Kingdom
In the UK, scholarship and bursary payments are generally exempt from income tax as long as you are studying full-time at a university, college, school, or other educational establishment.
Scholarships and bursaries will not count towards your Personal Allowance (that is, the amount of money you can earn before you need to start paying tax). Standard Personal Allowance is currently £12,570 (as of Dec 2025) – so even if you have a job where you make £10,000 a year plus receive a scholarship worth £5,000 a year, you won’t have to pay tax.
Your scholarship provider or HM Revenue and Customs can provide extra advice if you need it.
In Ireland
Ireland follows a similar pattern to other countries. Scholarships are usually tax-exempt provided you’re receiving full-time instruction at a recognised university, school, or educational establishment.
One important distinction is that this exemption doesn’t extend to fellowships. Fellowships operate under different tax rules, so don’t assume they’re treated identically to scholarships.
Your scholarship provider or Revenue can answer specific questions about your situation if you’re uncertain.
In the United States
In the US, scholarships and grants are tax-free when you’re pursuing a degree at an eligible institution and the money is used to cover specific educational expenses. Tax-free expenses include tuition, enrolment and attendance fees, and required books, supplies, and equipment for your coursework.
Where it gets taxable is with incidental expenses. Room and board, travel costs, and optional equipment must be included as income on your tax return. Think of it as a distinction between essential educational costs and lifestyle choices.
Your scholarship provider or the Internal Revenue Service can provide detailed guidance if your situation is complex or you have any concerns.
In Canada
Canada draws a clear line between elementary and secondary school scholarships (always tax-exempt) and post-secondary scholarships (usually tax-exempt with conditions).
For post-secondary study, you’ll need to be a qualifying student studying at a designated educational institution in a qualifying educational program. These terms have specific definitions, so check whether your circumstances meet the criteria.
Even if you don’t meet the qualifying criteria, the first $500 of scholarship money always remains tax-exempt. For qualifying students, typically the entire amount is exempt.
The Canada Revenue Agency or your scholarship provider can help answer any questions you might have.
Taking the next step
These guidelines provide a general framework, but every scholarship has unique terms and your personal circumstances matter enormously. Tax rules can also change, so information that’s current today might shift tomorrow.
Before making assumptions about your scholarship’s tax status, take these steps:
- Review your scholarship agreement carefully, noting any conditions about employment or service.
- Check with your careers adviser or university financial aid office, they’re experienced with these questions.
- When in doubt, contact your country’s tax authority directly.
Ready to explore and apply?
Applying for scholarships shouldn’t be intimidating, especially not because of tax concerns. Armed with this knowledge, you can approach scholarship applications with confidence, knowing roughly what to expect regarding taxation.
You can learn more about scholarships and browse for opportunities on our website here.
