Do Australians have to pay tax on lottery winnings?


Many Australians are dreaming of winning Powerball’s record $100 million jackpot tonight. But even if you beat the odds and win, will the tax man want some of that sweet cash?

In the United States, lottery winnings are subject to income tax. This means with federal and state taxes combined, some American prize winners face a marginal rate of 50 per cent or more.

But in Australia, chartered accountant Mark Schaefer told Yahoo Finance that winners take all, in most cases.

Lottery winnings such as Powerball, are not taxed in Australia,” he said.

“Income from hobbies, such as winnings from game shows, are normally also not taxed. However, if you regularly appear on game shows, possibly even to the extent you receive appearance money, you may have to start paying tax on your winnings.

But he warned that if an Australian sold their prize — such as a car or a house — capital gains tax could apply.

Can you claim gambling losses as a tax deduction?

Australians that punt as their day job do pay income tax on their winnings but could also claim deductions for gambling costs.

But it is very difficult to be considered a professional gambler.

“The Australian Taxation Office is reluctant to classify people that play games that involve an element of chance as a professional,” Schaefer told Yahoo Finance.

“It would open the floodgates to allow gamblers that lost money to claim tax deductions. And in the gambling industry, there are more losers than winners!”

There are many factors that could determine “professional” status — time, resources, frequency and whether it is the main source of income.

“Because everybody’s circumstances are difference, the only sure way to know is to get a private ruling from the ATO.”

The owner of Hobart’s Museum of Old and New Art (MONA), David Walsh, is a great example of a professional gambler – he reportedly used mathematical models to take advantage of pricing irregularities in betting markets, and made millions.

Although he did have a stoush with the tax office in 2012, this was resolved the same year with an undisclosed outcome. On Australia Day 2016, Walsh was awarded the Officer of the Order of Australia for his contribution to the arts.

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Source link Finance News Australia

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