An article that ran recently in MoneyWeb explained the issue of taxation on casino wins in South Africa. Players may be surprised to learn that in the vast majority of cases, South Africans do not have to pay tax on lottery, casino or competition winnings, allowing them to enjoy the total sum.
The article looks at three scenarios: Winning R5 million in the National Lottery, winning R200,000 at the local casino and winning R100,000 in a competition.
In the case of the National Lottery, winnings are regarded as capital and not included in a person’s taxable income. Thus, lottery winnings will not be subject to normal tax in South Africa, according to Wessel Smit, the director at The Core Group. There is, however, a requirement for winners to declare their winnings to the tax authorities in their annual tax returns.
When a sum of, say, R200,000 is won at the local casino, in 95% of the cases, the winnings are not taxable. This is because, in most cases, a player simply walks into a casino to play at the games or tables as a form of gambling hobby. The objective is not to gamble as a profit making scheme. So when are the winnings taxable? In some rare cases, gambling activities become a business, ie. players “enter a scheme of profit making”, according to the article. In this case, winnings are taxable at normal tax rates, although winners will also be able to claim gambling losses as deductions.
The final scenario presented in the article is the case of winning R100,000 in a competition. According to experts, there is a clear distinction between prize money is considered taxable and when it is not. If the prize is related to the winner’s job function (such as winning the best employee of the year award), then this is considered gross income and is thus taxable.
However, if the prize money is not related to the winner’s job function (eg. being the winner of a national newspaper crossword competition), then the sum is not subject to tax.
As can be seen, the vast majority of wins, whether a lottery win, slot machine win, blackjack win or national competition prize win, are not subject to taxation demands by the South African government. This means that players can enjoy playing – and winning – without the threat of the Tax Man breathing down their necks.