Ever wondered if you have to pay tax on lottery winnings? Well, guess what, if you win tomorrow’s mind-blowing $100M Powerball draw, you can have all the winnings to yourself!
According to the Australian Taxation Office (ATO), if you win in prize draws, raffles, lotteries, and instant scratches, you don’t need to declare your winnings. You can have the whole prize to yourself and you don’t have to pay any taxes. Isn’t that awesome?
Now, if you win a prize draw “run by your bank, building society, credit union or other investment body, you must declare on your tax return the value of any benefits or prizes you received” and “prizes” may include cash, low-interest or interest-free loans, holidays or cars.
However, there are instances when you have to pay tax on lottery winnings.
When do you have to pay tax on lottery winnings?
The cash prize itself from winning lotteries in Australia is not taxable. The earnings you get from it is another story.
For instance, if you decide to put the cash prize in the bank and that money earns interest, then that becomes taxable.
You will also have to pay tax on lottery winnings if you won a house or a car, for example, and you decide to sell them. Capital gains tax may be applied to any proceeds you get from selling a house or a car you get from lotteries and draws.
The ATO is clear on that.
“If you sell or otherwise dispose of an asset that was a prize from a lottery, you may make a capital gain, which must be declared on your tax return.”
What about lottery winnings made from other countries?
Do you have to pay tax on lottery winnings from overseas?
You’re in luck! The Australian tax laws still apply to lottery winnings from outside the country.
That means if you’re living in Australia and you won a lottery from overseas, you still get the entire winnings to yourself.
For a bit of perspective on how lucky you are, do you know that in the US, lottery winnings are subject to income tax? For lotto winnings overseas, an initial federal tax of 25 per cent of any prize above $7200 will also apply.
But you’re not in the US, so lucky you!
It’s fantastic to win the lottery in Australia particularly because you don’t have to pay tax on lottery winnings. Imagine getting all that $100M to yourself. Every single dollar of it. Imagine winning the Powerball lottery tomorrow.
Now all you have to do is get your numbers right.
The information contained in this article should be regarded as general information only and should not be viewed as financial advice. We do not accept any liability for any injury, loss, or damage incurred by use of or reliance on the information provided herein.
Chan & Naylor does not support problem gambling. If you need help with gambling, please seek professional gambling counselling services.
If you need help legally reducing your taxes, contact a Chan & Naylor accounting specialist here.
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