The Reasoning Behind the Rule

The Australian Taxation Office (ATO) considers lottery wins to be the result of good luck or chance. Since playing the lottery is treated as a hobby or recreational activity for the vast majority of people, the winnings are not considered assessable income. The money you use to purchase tickets is also not tax-deductible.

This applies to all official Australian lottery games, including Powerball, Oz Lotto, Saturday Lotto, and others.

Important Exception: Professional Gamblers

There is a rare exception to this rule. If a person's gambling activities are so systematic, regular, and business-like that they are considered a professional gambler, their winnings may be treated as taxable income. However, this is extremely uncommon for lottery players and typically applies to professional sports bettors or card players.

What About Interest Earned on Winnings?

This is a crucial point. While the initial prize lump sum is tax-free, **any income you generate from that money is taxable.** For example:

  • If you deposit your winnings into a bank account, the interest you earn is taxable income.
  • If you invest the money in stocks or property, any dividends or rental income you receive are taxable.
  • If you sell an asset (like property) that you bought with your winnings for a profit, that profit may be subject to Capital Gains Tax (CGT).

It is highly recommended that winners of any significant prize seek professional financial advice to manage their new wealth effectively and understand their future tax obligations.

How Australia Compares to Other Countries

Australian lottery winners are exceptionally fortunate. In many other parts of the world, lottery winnings are subject to heavy taxation.

Country Federal Tax on Winnings
Australia 0% (Tax-Free)
United States Up to 37% (plus state taxes)
Spain 20% (on amounts over €40,000)
United Kingdom 0% (Tax-Free)

Final Summary

For over 99.9% of players in Australia, the news is good: your lottery prize is yours to keep, in full. Just remember to be smart about what you do with it afterwards, as the income it generates will be part of your regular financial life.