Sars wants your lotto winnings, here’s how they will get their cut

Everyone has fantasised, and even pre-planned how they would spend their lotto millions should they be so lucky.

And even if they are, Sars wants a piece of the pie.

A common theme among netizens is that if they do hold the winning ticket – it will be a secret.

Unsurprisingly, many who do win those life-altering jackpots want to remain anonymous, not even revealing their newfound wealth to close friends and family.

Sars wants a cut of your winnings

While Ithuba Holdings proudly declares that Lotto winnings are tax-free, there are loopholes that allow the taxman to collect his cut.

Two experts from Tax Consulting South Africa, Head of Tax Legal, Darren Britz and Legal Manager: Tax Controversy and Dispute Resolution Andre Daniels share some insight into how your winnings will be taxed.

It’s natural to want to upgrade your life after bagging a multi-million jackpot. At the top of everyone’s list is a new home and vehicles.

While spending the money on its own may not be a tax event, you do have to declare these substantial purchases to the revenue services in your tax return. Britz and Daniels explain.

“Any sale of those assets must be assessed for whether there is income tax payable.

Selling a house is usually subject to capital gains tax; however, the sale of a car is usually not subject to income tax at all because it is known as a ‘personal use asset’.

But, if assets are used for business purposes, then the sale of those assets might also have a different tax implication.”

Sharing is caring? Sars also wants a share

Sars is most likely going to take their cut of your millions the moment you start helping family and friends.

When you become an overnight millionaire, the urge to assist struggling family or friends is natural.

However, this is when Sars is likely to cash in on your generosity.

“Any money gifted to friends and family should be disclosed to SARS on a Donations Declaration Form and might be subject to donations tax,” said Britz and Daniels.

If you want to buy your ageing parents a new home or settle a younger sibling or cousin’s student loan/debt, that would be considered a donation.

“Donations tax is levied once the person has made total donations in excess of R100,000 per year,” explains Britz and Daniels.

But this loophole does not apply if you are splitting your loot with your spouse.

What if I choose to save and not spend it?

If the person decided to use these winnings to open a business or make an investment, any income earned by the person on that business or investment must also be disclosed to Sars as income tax.

If you put your money in a high-yield savings account, it is likely you will earn interest, which is a form of income.

“Interest earned is taxable subject to the annual exemption, currently R23,800.00 for individuals under 65 years old, and R34,500.00 for individuals 65 years and older,” said Britz and Daniels.

“Failure by a person to declare their income to Sars and pay income tax is a criminal offence. The person may be subject to a fine and possibly jail time.”

Friday’s Powerball Plus is at an estimated R87 million and Powerball at an estimated R26 million.

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