Good News for Most Winners!
Competition and lottery winnings are generally NOT assessable income for ordinary Australian residents.
This means if you win a car, cash prize, holiday, or any other prize from a standard competition, you typically don't need to declare it on your tax return.
99%
Of Winners Pay No Tax
On competition prizes
5
Key Exceptions
To be aware of
50%
CGT Discount
If held 12+ months
The General Rule: No Tax on Prizes
According to the Australian Taxation Office (ATO), prizes won in ordinary lotteries and competitions are generally NOT assessable income for ordinary Australian residents.
This applies to prizes from lotto draws, raffles, game shows, and standard promotional competitions. You typically don't need to declare these on your tax return.
ATO Official Stance
"Prizes won in ordinary lotteries conducted by Golden Casket, NSW Lotteries, Tattersall's, South Australian Lotteries and similar organisations... are not ordinary income." - Australian Taxation Office
When DO You Pay Tax? The 5 Exceptions
Exception #1: Bank & Financial Institution Prizes (MUST DECLARE)
This is a key exception many people miss! Prizes from banks, building societies, credit unions, or investment bodies MUST be declared in your tax return.
Taxable financial institution prizes include:
- Cash prizes from bank promotions
- Low-interest or interest-free loans
- Holidays won from your bank
- Cars won from credit union promotions
Source: ATO - "If you win a prize from...a bank, building society, credit union or investment body, you must declare [it] in your tax return."
Exception #2: Professional Compers
If you're a "professional comper" (someone who treats competitions as a business), your winnings MAY be considered assessable income.
ATO considers these factors:
- Systematic and organised approach
- Significant time devoted to entering
- Intent to profit
- Business-like record keeping
Note: Very few people fall into this category. Entering competitions regularly as a hobby doesn't make you a professional.
Exception #3: Capital Gains Tax (CGT) When Selling
While the initial prize isn't taxed, selling the prize later may trigger CGT. The cost base is the market value at the time you won it.
Example: Winning a Car
Win car valued at $40,000: No tax on winning
Cost base for CGT: $40,000 (market value when won)
Sell car later for $38,000:
- Capital gain/loss = $38,000 - $40,000 = -$2,000 (capital loss)
- No CGT payable (you made a loss)
But if you sold for $50,000:
- Capital gain = $50,000 - $40,000 = $10,000 gain
- CGT payable on $10,000 (or $5,000 with 50% discount if held 12+ months)
Pro Tip: Keep documentation of the prize's market value when you won it. This is your cost base for CGT purposes.
Exception #4: Work-Related Prizes
Prizes won through your employment (e.g., sales competitions, performance bonuses structured as "prizes") are assessable income and subject to normal income tax. Your employer should include this in your payment summary.
Exception #5: Income Generated from Prizes
While the prize itself is tax-free, any income you earn from investing or using the prize IS taxable.
Examples of taxable income from prizes:
- Interest: Cash prize deposited in bank â?? interest is taxable
- Rent: Win a property â?? rental income is taxable
- Dividends: Win shares â?? dividends are taxable
Specific Prize Types: Tax Treatment
| Prize Type | Initially Taxable? | Notes |
|---|---|---|
| Cash Prizes (standard comps) | No | Tax-free; interest earned is taxable |
| Bank/Credit Union Prizes | YES | Must declare on tax return |
| Cars | No | CGT may apply if sold for profit |
| Holidays/Travel | No | No tax implications (unless from bank) |
| Electronics | No | CGT may apply if sold for profit |
| Gift Cards | No | No tax implications |
| Houses/Property | No | Stamp duty applies; CGT if sold; rent is taxable |
| Work Competition Prizes | YES | Assessable income |
Centrelink & Competition Winnings
Important for Centrelink Recipients
While competition winnings aren't taxable, they may affect your Centrelink payments under the income and assets test.
- Cash prizes may count as income in the period received
- Physical prizes (cars, property) count as assets
- Large prizes may temporarily reduce or cancel payments
Always report significant winnings to Centrelink promptly to avoid overpayment issues. Contact Services Australia for specific guidance.
Record Keeping Best Practices
What to Keep (Important for CGT)
- Prize notification with value - This establishes your CGT cost base
- Market value documentation - RRP, valuations, or receipts showing prize value at time won
- Sale records - If you sell the prize later, keep all sale documentation
- Competition T&Cs - Shows it was a legitimate competition (not work-related)
FAQ: Competition Tax Questions
Do I need to declare competition winnings on my tax return?
Generally no, unless: (1) the prize is from a bank/credit union/investment body, (2) you're a professional comper, or (3) it's a work-related prize. Standard lottery and competition wins don't need to be declared.
What if I win multiple prizes in one year?
Still generally tax-free, unless you're operating in a business-like manner. The ATO looks at your overall approach, not just the number of wins. Hobby compers winning multiple prizes are still not taxed.
Do I pay GST on prizes?
No, GST is handled by the competition organiser. You receive the prize GST-free.
What's my cost base if I sell a prize?
Your CGT cost base is the market value of the prize at the time you won it, not zero. Keep documentation of the prize value when won.
What about overseas competition winnings?
Generally the same rules apply for Australian residents. However, some countries (like the US) withhold tax on prizes before you receive them. Consult a tax professional for international prizes.
Quick Reference: Tax Checklist
Most prizes are tax-free for hobby compers
Bank/credit union prizes MUST be declared
CGT cost base = market value when won
Wait 12+ months for 50% CGT discount
Work prizes ARE taxable income
Interest/rent from prizes is taxable
Keep prize value documentation
Report to Centrelink if receiving benefits
Disclaimer: This guide is for general information only based on ATO guidelines. For specific tax advice, consult a registered tax agent or accountant.