Is my Lottery Win taxable?
What are the Legal and Tax Implications of lottery winnings and gifting in Australia?
According to the Australian Taxation Office (ATO), lottery winnings are generally considered tax-free for Australian residents when the winnings come from Australian lotteries.
They are classified as “windfall gains” and are not subject to income tax. However, there are important caveats:
- Interest earnedon your winnings (e.g. in a savings account) is taxable as income.
- Capital gains tax (CGT)applies if you use your winnings to purchase assets (like property or shares) and later sell them for a profit.
- International lottery winningsmay be taxed in the country of origin and potentially in Australia as well.
- Gift taxmay apply – refer next paragraph below.
In Australia, gifts are generally not considered as income and don’t require you to pay any Australian taxes. A gift is defined as:
- there is a transfer of money.
- the transfer is made voluntarily.
If your gift fits the above criteria, then you don’t pay tax on it. There’s no limit on how much money you can give or receive as a gift!
However, there are some occasions where tax or capital gains tax (CGT) may apply. For example, in some instances, when gifting property, shares or crypto assets, or when receiving money or an asset from a non-resident trust.
You should always check with your accountant or tax adviser.
How do I prove that money I’ve received is a gift?
You won’t need to send proof unless asked. If the ATO require proof, ask the gift giver for a letter or other written evidence. They just need to state that the money is a gift.
I receive government benefits – will gifting money to someone impact my payments?
Giving away money or assets may affect both you and the gift recipient, if either of you receive government benefits. It’s best to check directly with Centrelink, or your Financial Adviser.
Boris Pedisic CFP®
Representative (No 301739)
