What the ATO Really Cares About
With the Australian Open Tennis kicking off, one of the funnier moments in this Weekly Wrap came during the discussion about tennis prize money, as well as the story of a “one-point slam” where an amateur won $1 million this week.
Behind the humour though is a very real topic — how the ATO treats prize money, winnings and side income. Many Australians assume prize money is tax-free, or that “hobby income” doesn’t count. In reality, the answer depends on circumstances. The ATO looks at factors such as intention, repetition and whether the activity is being carried out commercially. It’s less about what you call it, and more about what it actually is.
If prize money is earned through something connected to your profession, business or income-producing activity, it’s more likely to be taxable. If you’ve got a side hustle — coaching, consulting, selling products, content creation — then winnings or payments related to that activity can fall into assessable income. This is where people get caught: they earn extra income, enjoy it in full, and then get surprised later when tax, Medicare levy, or GST considerations come into play. Even for one-off windfalls, it’s wise to assume some tax may be payable until you’ve checked properly.
The best habit to build with any unexpected income is simple: set aside a portion immediately, keep records, and seek advice before spending it all. As income becomes ongoing, structuring can matter too — a growing side hustle might benefit from proper bookkeeping, deductions tracking, and potentially reviewing whether the activity should be treated as a business for tax purposes. If you’ve earned prize money, side income or a windfall this year and you’re unsure what it means at tax time, book a tax planning session with our team so you can stay compliant and keep more of what you earn legally.
Fan fact, The ATO indeed has a presence at the Australian Open Tennis, and whether it is $150,000 for your first round exit or $4.15 million for winning the tournament they will be waiting for you. Tax will be taken out according to your tax residency status and you will see the net amount. If you thought trying to sneak a drink into Melbourne Park was hard try and leave without paying your taxes. You have no chance!
To find out how we can help see our Tax Advisory.