Here’s the good news up front: if you win the Lotto or PowerBall in South Africa, the full prize amount is yours.

SARS treats lottery winnings as a windfall, not income, meaning your prize is completely tax-free, whether you win R50 or R93 million.

Sizekhaya pays out the exact advertised amount, with nothing withheld.

The part that catches winners off guard

However, here’s where it gets interesting. Once that money is sitting in your bank account, what you do with it next can create a tax bill of its own.

If you put your winnings into a savings account or fixed deposit, the interest you earn is taxable.

This applies once it climbs above the annual interest exemption of R23 800 (under 65) or R34 500 (65 and older).

Say you win R10 million and put it into a fixed deposit earning 8% a year.

That’s roughly R800 000 in interest in year one alone.

Everything above the exemption gets added to your taxable income at your normal marginal rate.

Other ways your winnings can quietly become taxable

The interest rule isn’t the only one worth knowing.

Dividends earned from shares or unit trusts bought with your winnings are typically taxed at 20%.

Buy a property with the money and rent it out, and that rental income is taxable too.

Sell an asset you bought with your winnings for a profit, and capital gains tax can apply on that profit.

Do you need to tell SARS?

You don’t need to declare the prize itself, since it isn’t taxable income, but any secondary earnings from it, interest, dividends, rental income, do need to be declared in the ‘normal’ way.

Winning seems to be the ‘easy’ part, it’s what you do with the money afterwards that actually needs a bit of planning.

Would knowing about the interest tax change how you’d handle a big win, or were you already aware?

Let us know in the comments below …