Lottery Winnings and Centrelink: What You Need to Know

Are lottery winnings counted as income?

Under Centrelink rules, a lottery win is generally not counted as income in the usual sense. Centrelink's income test applies to money you earn regularly from employment, business, investments, or certain other sources — not to one-off windfalls like a lottery win.

However, this does not mean a lottery win has no effect on your payments. The money you receive becomes part of your financial assets, and it is the assets test that typically creates the impact for Centrelink recipients.

The assets test — where winnings have real impact

The assets test is used to assess how much your Centrelink payment is reduced based on the value of assets you own. Lottery winnings deposited into a bank account become a financial asset immediately.

For the Age Pension, Centrelink has both a lower and upper assets threshold. Once your assets exceed the lower threshold, your pension reduces by $3 per fortnight for every $1,000 of assets above the threshold. Once assets reach the upper threshold, your pension payment stops entirely. These thresholds are indexed and change periodically.

For payments like JobSeeker and the Disability Support Pension, similar assets tests apply. A significant win may affect your eligibility or payment amount.

Do I have to report a lottery win to Centrelink?

Yes. You are legally required to report any change in your financial circumstances to Centrelink within 14 days (or by your next reporting date, whichever comes first). A lottery win that changes your assets is a reportable event.

Failure to report can result in an overpayment, which Centrelink will seek to recover. In some cases, Centrelink may also impose penalties for non-disclosure.

You can report a change of circumstances online via myGov, by calling 13 23 00, or by visiting a Services Australia service centre.

What about spending the money — does that help?

Spending lottery winnings does reduce your assets, but Centrelink has rules to prevent people from quickly spending money in order to qualify for (or restore) payments. These are known as the deprivation rules.

If Centrelink determines you have "gifted" or disposed of assets below market value, or given money away, they may still count those funds as part of your assets for up to 5 years. Legitimate spending on living expenses, debt repayment, or purchasing assets at market value is treated differently.

This is a complex area. Getting advice from a financial information officer (available for free through Services Australia) or an independent financial adviser before making large financial decisions is strongly recommended.

Are lottery winnings taxed in Australia?

Generally, no. Australia does not have a specific lottery or gambling winnings tax. Lottery prizes are typically paid as lump-sum, tax-free amounts for individual players who are not considered to be in the business of gambling.

However, any investment income earned from your winnings (such as bank interest, dividends, or rental income if you purchase a property) will be taxable. If you are on Centrelink, this investment income will also be assessed under Centrelink's income test.

Responsible gambling for Centrelink recipients

Playing the lottery when you are receiving Centrelink payments is legal, but it is worth thinking carefully about how much you spend. If you are on a fixed income, even small amounts add up over time.

Where to get help