A position paying a stipend often provides an excellent opportunity to learn skills and gain experience. The stipend will help you cover your expenses, just like a wage or salary would. You have to understand how stipends work before accepting these positions. In this article, we explain what a stipend is, how it works and who receives these payments.
What is a stipend?
A stipend is a fixed sum paid regularly to someone. This amount offsets cost-of-living expenses, such as food and accommodation. A stipend is sometimes called a contribution to living expenses (CLE).
Stipends are usually calculated as yearly amounts. However, this total sum gets divided into smaller amounts dispensed every fortnight or month. These small, regular payments help stipend recipients manage their expenses.
Who receives a stipend?
People pursuing unpaid work or study may receive a stipend. They include:
- Postgraduate students conducting academic research
- Religious leaders, including ministers, home missionaries and deaconesses
- Volunteers working for non-profit groups classified as public benevolent institutions (PBIs)
Most people who receive stipends have positions focusing on education and training. In the short term, their training usually benefits the stipend recipient more than their employer.
How do stipends work?
Understanding how stipends work and your obligations can help you use your stipend correctly. Note the following points before accepting a stipend:
Stipends are usually designed to cover living expenses, such as accommodation, meals and travel costs. In some cases, such as the stipends priests receive, people may get a stipend along with some or all of these benefits. Stipends for students offset their tuition fees and the cost of other essentials, such as textbooks and laptops.
Minimum stipend amount
Schools and employers provide stipends at their discretion. As there is no minimum stipend amount, stipends can be less than industry award wages and the national minimum wage. Some groups, such as universities and religious orders, list their stipend amounts on their websites. This transparency ensures all people who receive a stipend in the same program receive the same amount.
Most stipends are tax-exempt, so their amount does not count towards the recipient's taxable income. The stipends part-time students receive are 100% taxable. If you are a part-time student receiving a stipend, you can claim the tax-free threshold for your stipend income if:
- You are not already claiming it from another payer (another employer or a government program, such as JobSeeker or Austudy)
- Your total income from all sources will be less than the tax-free threshold ($18,200 for the 2020–2021 tax year)
If your total income, including your stipend, government payments and income from full or part-time work exceeds $18,200, claim the tax-free threshold from your highest income source. The government will automatically tax your stipend, so you will have little to no tax bill after lodging your tax return.
The stipends of religious leaders have two parts: 70% taxable and 30% taxable. Religious leaders receive the taxable amount directly. The remaining 30% goes into a church trust fund. These amounts are usually in addition to non-cash benefits, such as travel and technology allowances. These fringe benefits are tax-exempt.
Tax return reporting
As most stipends are tax-exempt, you will not report them as assessable income on your tax return. If you receive other payments, from the government or employment, you need to complete a tax return. However, you will omit the information about your stipend. If you get a taxable stipend, as part-time students and religious leaders do, declare the amount as taxable income on your tax return. Each year you receive your stipend, you must lodge your tax return by 31 October.
If your stipend is tax-exempt and you do not have any other taxable income, submit a non-lodgement advice form. This form lets the Australian Tax Office know you don't need to submit a tax return.
You always have the right to negotiate your stipend. Private businesses are more likely to consider increasing your stipend than universities and charities, who often have limited funding. Conducting careful research before negotiating your stipend can increase your chance of success. Consider the following factors when negotiating your stipend:
- What people in similar positions receive for stipends: Research what others in your position make and ask for a comparable stipend.
- How much your living expenses are: Calculate your living expenses and note how much your stipend covers. If the gap is significant, you may have a stronger case for a raise. Itemise your living expenses so the person setting your stipend understands your budget.
- Whether other benefits are available: Some groups may provide extra benefits if they cannot raise your stipend. Consider whether you would accept free room and board or catered meals, for example, rather than more money.
When requesting a stipend raise, start by thanking the organisation for your opportunity. Explain your research findings before stating the stipend amount you want. Be prepared to settle for a more modest increase than you planned.
Read more: How to Ask for a Raise (with Examples)
Stipend vs. salary
Before accepting or negotiating your stipend, think about how this financial benefit differs from a salary:
Some of the key characteristics of salaries include:
- Compensation for employees
- Payment for services or hours worked, with potential for overtime benefits
- Opportunity for an increase based on performance
- Subject to minimum wage requirements
- Taxed by employer
- Packages include superannuation and leave entitlements
Stipends often have these characteristics:
- Fixed amount paid to interns, apprentices, clergy, trainees and students
- Remains the same, regardless of services performed or hours worked
- Set by organisation, without minimum wage or leave requirements (although leave is usually granted)
- Often tax-exempt
- Issued without superannuation (except for religious leaders)
Positions with salaries and stipends each have their own benefits. Positions with salaries often provide greater wages and opportunities for career growth. However, positions with stipends can provide excellent learning opportunities. While stipends have set periods, recipients can often set their own hours.
Types of stipends
Many types of stipends exist to cover the expenses of various voluntary and unpaid work. Here are some common situations where employers may offer stipends:
The Australian Government offers stipends through its Research Training Program (Domestic) Stipend Scholarship and Research Training Program (International) Stipend Scholarship programs. These programs provides financial aid to qualifying domestic and international postgraduate students with strong research potential. Some universities also have their own research scholarship programs.
The stipend payments from these programs help students focus on their higher degree research projects without the distractions of full- or part-time work. As such, principal supervisors must usually approve any outside work accepted by their students receiving stipends, including fieldwork. Many academic research stipends also limit student earnings from employment to 75% of the stipend amount.
While students receiving stipends have limited employment options, they may increase their earnings through extra allowances. For example, students who move to another city for study may apply for relocation allowances. They may also apply for thesis allowances to cover the cost of printing and binding their thesis. Students may also apply for other scholarships or awards amounting to 75% of their stipend amount or less.
In most cases, stipend recipients must be full-time students. Part-time students may qualify if they have extenuating circumstances such as family commitments, medical conditions or career commitments that limit their study time.
Students receiving government-issued stipends, and some students receiving university-issued stipends, must acknowledge this support in their research papers. For example, in their thesis students could write 'This research is supported by an Australian Government Research Training Program Scholarship.'
Some internships provide stipends that cover the cost of accommodation, food and transport. Companies offering interns stipends consider the local cost of living when setting their stipend amount. Giving an intern a stipend shows trust which may lead to full-time paid employment.
Stipends for religious leaders
Religious leaders often receive stipends instead of salaries. These stipends are very similar to salaries, as they are largely tax-deductible and bundled with superannuation. However, unlike a regular salary, some stipend is withheld and deposited into a church trust fund. The remaining amount is more generous than many stipends though, and often includes other benefits such as technology and travel allowances, allowing religious figures to live comfortably without seeking other employment.
Stipends for charity volunteers
People volunteering with charities classed as PBIs may also qualify for stipends. These charities include:
- Disability support services
- Housing groups providing affordable accommodation for people impacted by poverty, disability and illness
- Some not-for-profit aged-care homes
Stipends allow volunteers to focus on their vital work of helping vulnerable members of the community, rather than pursuing other paid employment options.