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!
Yay!
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.
Australia tax laws on prizes and lottery winnings
If you sell a car or a house you won from a draw, the proceeds from the sale is subject to capital gains tax.
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.
We’re here to help
At Chan & Naylor Pymble, we understand that navigating the complexities of tax laws can be daunting, especially when it comes to unexpected windfalls like lottery winnings. Our expert team in Sydney NSW is here to help you understand these nuances and ensure you comply with all tax obligations while maximising your winnings. Whether you need advice on managing a large prize or have other tax-related queries, we’re here to guide you every step of the way. Don’t hesitate to reach out – at Chan & Naylor Pymble, your financial well-being is our priority.
About Chan & Naylor
Since 1990, Chan & Naylor has partnered with thousands of business owners and property investors in managing their taxes and building a tax-effective wealth. Choosing Chan & Naylor means you’re not just selecting a service provider; you’re gaining a partner aligned with your financial goals. You’ll have access to a dedicated client manager supported by a team of accountants that specialises in Australian taxation.
Disclaimer
This guide serves as general advice and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
