Are Lottery Winnings Subject to Taxation?

This frequently asked question became more popular following the announcement of the sole, PowerBall winner of the biggest ever lottery jackpot in South Africa.

In an interview with Tony Ndoro on eNCA earlier in August, the National Lottery Operator’s (ITHUBA) public relations manager confirmed that the punter who scooped the R145 million PowerBall jackpot would receive all his winnings as they are, tax free!

Why are lottery winnings not taxed?

Member of the Executive team at ITHUBA Khensani Mabuza, says: “The Lottery winnings are regarded as capital in nature and not included in the taxable income of the individual. Once the winner starts generating interest from their winnings, only the accumulated interest will be subjected to tax. The amount of interest taxed will of course depend on the amount of money the winner chooses to invest.”

Mabuza goes on to say that it is fair for the new millionaires to keep all of their new wealth: “An unexpected windfall worth millions can really change the receiver’s life, but the extent of its impact can be quite limited once the taxman takes his cut. A lot of the lottery winners are really just ordinary South Africans who deserve a chance to a new life. It is a great thing that these winners have an opportunity to start their new life with each and every single cent that they have won. The fact that the interest generated from their winnings then becomes taxable, puts a responsibility to the winners to make sound investment decisions that will give them good returns”, said Mabuza.

ITHUBA assists all their jackpot winners with financial expertise to help them make wise financial decisions that will maintain their newly acquired wealth.

If you are one of the regular lottery punters, you can rest assured that should you strike it lucky, you will receive your new millions, tax free.