If you are paying or receiving child support, you may have wondered how a large financial windfall like winning the lottery or becoming entitled to an inheritance may affect your child support obligations. As with most family law and child support matters it can be complex.
We’ll look at how an unexpected or chance financial event, such as a lotto win, is considered for both child support and property settlement purposes.
Child Support Assessments & Taxable Income
In Australia, Services Australia calculate how much child support is payable. It considers the parties’ respective income and care of the child or children from the relationship. It may also consider broader financial resources such as trusts, businesses, or more complex financial setups that may be less transparent than straightforward employment income from casual, part-time or full-time employment.
Taxable income is adjusted for the purpose of child support assessments, with a ‘self-support’ amount set each year by Services Australia. The “adjusted income amount” of each parent is then used by Services Australia to administratively assess the amount of child support payable.
Are Lottery Winnings Taxable?
In Australia, lottery winnings are not taxable. The Australian Taxation Office (ATO) classifies them as a windfall gain, meaning they are usually exempt from income tax. This applies to winnings from national and state lotteries, raffles, sweepstakes and game shows (unless you receive regular appearance fees).
This means that a lottery prize would not be assessed as taxable income. You do not need to declare the winnings themselves on your tax return.
However, if you decide to invest the lottery winnings, and you earn income from those investments, such as interest or dividends, that income is taxable and needs to be declared on your tax return.
This would include:
- Interest or investment earnings: If you deposit your winnings into a savings account or invest them, any interest, dividends or capital gains generated from that money are taxable;
- Rental income: If the winnings are used to purchase an investment property, any rent you receive counts as taxable income;
- Business income: If the winnings are used to start or expand a business, any income generated by the business is assessable; and
- Trust or fund distributions: If you place the funds into a trust or managed fund, any distributions paid to you form part of your assessable income.
It’s also important to note that the context of the winnings can affect if they are assessable. For instance, if you are in the business of gambling or a professional punter or regularly win large sums as part of a business activity, the ATO may treat it differently. This is relatively rare.
In summary, winning the lottery may indirectly affect child support obligations and a parent may apply for a Change of Assessment, which we’ll look at next.
Child Support Change of Assessment – Based on Financial Resources
If one parent experiences a significant change in financial circumstances – such as winning a lottery – this may affect their child support obligations, even though lottery winnings are not considered taxable income. Either parent can apply for a Change of Assessment through Services Australia.
The assessment considers income, assets, living expenses and care arrangements for the children. A sudden increase in financial resources may result in a higher level of child support becoming payable or less child support being receivable. If it’s only a smaller win, a change of assessment may not apply.
Child Support Debt & Lottery Wins
If one parent owes child support to the other parent and later receives a large lottery win, it may give rise to changing the arrears payments or repaying amounts faster. While lottery winnings are not taxable, Services Australia and the Federal Circuit and Family Court of Australia can consider the windfall when assessing arrears repayment.
In practice, a sudden increase in wealth may allow the parent who is owed support to seek recovery of unpaid amounts, either through negotiation, a variation of child support assessment, or by applying to the court for enforcement. Under section 72A of the Child Support (Registration and Collection) Act 1988 Services Australia can also unilaterally issue a notice to the lottery organisation or bank, requiring them to pay the arrears directly to the Registrar of the Agency.
What If Property Settlement Has Not Occurred?
Child support aside, lottery winnings are considered part of the asset pool if a property settlement has not yet been finalised. Under the Family Law Act courts assess all assets and financial resources held by either party at the time of the hearing, not at separation.
If a winning ticket was purchased with joint funds or during a marriage or de facto relationship, the resulting winnings are likely treated as a shared asset. As for post-separation lottery winnings, they are not automatically the sole property of the winner. Courts have consistently held that post-separation lottery winnings can be included in the property pool even if they are the sole property of one party. The nature of the parties’ relationship at the time of the purchase determines characterisation. In other words, post-separation wins will influence a property settlement if financial settlement has not formally taken place.
For example, in the case of Farmer & Bramley (2000) FLC 93-060, the courts awarded the wife $750,000 of a $5 million lottery win by the husband, approximately 19 months after they separated. The courts awarded this due to the wife’s significant financial and non-financial contributions and based on the parties’ relationship history.
The husband appealed this decision and the Full Court dismissed it after considering the level of ongoing support for the husband over more than a decade while he lived with a heroin addiction. The wife supported herself, their child, and him over that time, with no support from the husband.
Assessing Contributions & Separate Finances
Even when couples maintain separate bank accounts or lead separate financial lives, the court examines each party’s financial and non-financial contributions to determine a fair and just property division. A windfall such as a lottery win will be included in the asset pool and consideration will need to be given to how it came about to determine how it is to be treated in the adjustment of property. Each party’s efforts, financial responsibilities, and post-separation circumstances are considered to reach a fair and equitable outcome. Since the amendments to the Family Law Act 1975 came into effect on 10 June 2025 the Court is also required to take into account the need of a parent to provide housing for a child of the marriage or relationship.
The timing of the win, the nature of the relationship, and the parties’ ongoing financial responsibilities all play a role in how courts allocate the funds. Here are a few examples of scenarios that can arise if a property settlement has not yet occurred and time limits have not yet passed.
Separated 16 Months, No Settlement Yet
If a de facto couple has been separated for 16 months and one person wins the lottery before reaching a formal property settlement, the court may well treat the winnings as part of the shared asset pool. Whether it is divided depends on who purchased the ticket, how finances were managed post-separation, and whether the parties were still financially connected or living largely separate lives. It is important to note, however, that married couples have 12 months from the date of divorce and de-facto couples have two years from separation to file a property settlement application (see the case of Farmer & Bramley above). Once these time limits expired, the parties to a defacto relationship (2 years after separation) or to a marriage (12 months after a Divorce Order becomes effective) are prohibited from commencing Court proceedings without first obtaining permission from the Court to do so. Obtainng the Court’s permission can be expensive and there is always the risk that the Court will refuse to grant such permission.
Divorced After 7 Years, No Property Division
If the parties have been separated for 7 years, but only just divorced (triggering time limits for property settlement) and have not finalised their property settlement, a later lottery win could still become relevant. Without a formal settlement, each party retains the potential to assert claims under the Family Law Act. Such cases are complex because there are issues concerning post separation contributions which can be financial and non-financial, direct and indirect and include contributions made in the capacity of homemaker and parent. Any significant financial change such as a windfall by way of a lottery win or inheritance or a significant decline in finances to one of the parties makes these considerations even more difficult.
It is prudent to finalise financial matters as soon as possible after separation and/or divorce and not delay them as such delays only cause complications and complexities which lead to increased legal costs.
Ticket Purchased with Joint Funds
Where a winning lottery ticket was purchased using joint funds or from a joint bank account, the win is generally treated as joint property because they made a joint contribution, even if the parties later separate. The court is most likely to include the winnings in the asset pool, dividing them along with other assets.
Can Other Large Payments or Payouts Affect Child Support?
Large unexpected payments or payouts, such as inheritances, insurance settlements, or redundancy payments, can sometimes affect child support calculations. How they are treated depends on whether the funds generate ongoing income or change the financial circumstances of either parent.
Insurance or Superannuation Payouts & Child Support
Insurance or superannuation payouts are usually considered part of a parent’s financial resources. If a payout increases a parent’s ability to support their child, Services Australia may review the assessment. A lump sum from life insurance or super may not count as taxable income, but it may justify a change of assessment if it alters the parent’s long-term financial position or earning capacity.
Compensation Payments & Child Support
Compensation payments can affect child support when they replace income or reflect lost earning capacity because these amounts may be treated as part of a parent’s income.
Payments for pain, suffering or medical expenses are generally excluded, although any income generated from investing a lump sum may be considered. If the compensation changes a parent’s financial position or ability to work, either parent can request a reassessment to ensure the child support reflects current circumstances.
Inheritances & Child Support
An inheritance is not treated as income for child support purposes but it may be relevant. Services Australia may consider it under a change of assessment if it significantly increases one parent’s assets or financial security. While inheritances are personal, large amounts of money can significantly impact a parent’s ability to contribute by way of child support, particularly if they reduce debts or increase income from investments.
Large Financial Gifts
Significant monetary gifts from family or friends are not income for child support purposes. However, if the gift is invested and then generates ongoing returns such as interest or dividends, those earnings are taxable and will affect child support obligations. Maintaining clear records and seeking professional advice ensures that you understand how such gifts may impact assessments.
Business Trusts & Dividends
Income or distributions from trusts, dividends or shares may impact child support calculations even if the principal or capital sum is not directly assessable. Regular distributions or profit allocations can increase assessable income, potentially changing obligations. Careful record-keeping and financial planning are essential, and advice from a Family Lawyer or accountant can clarify how these funds may affect a child support assessment and rights or obligations in relation to child support.
Reportable Fringe Benefits
Non-cash benefits from your employer, such as a company car, private health insurance contributions, or housing allowances, may be considered reportable fringe benefits. While the value is not always treated the same as salary, it can influence child support assessments. Accurate reporting and financial and legal advice are essential.
Investment Income
Income from investments including dividends, interest, rental properties or managed funds is taxable income and generally taken into account for child support purposes. Even if the principal or capital amount is untouched the earnings increase financial capacity. Keeping detailed records and consulting a family lawyer or financial advisor helps clarify how investment income affects obligations.
Redundancy Payments
Lump-sum redundancy payments or termination payouts are often treated differently from regular income. While the principal or capital sum may not be considered any ongoing interest or benefits generated can influence child support obligations. Early consultation with a legal or financial professional ensures you understand how redundancy impacts obligations and may guide future financial planning.
Lottery Wins & Child Support Change Of Assessment
In Australia, either parent can apply to Services Australia for a Change of Assessment if they feel the current assessment is wrong or unfair. To do so, they need to submit a form and state a ground with supporting evidence.
For The Paying Parent
A lottery win is not taxable income, so the lump sum does not directly increase child support. Any income earned from investing the winnings (such as interest, dividends, or rent) is assessable and may increase payments. A significant and lasting improvement in financial resources can trigger a reassessment by Services Australia – so keep records and notify Services Australia if your financial situation materially changes.
For The Receiving Parent
The lump sum itself does not reduce child support, but again, the investment income generated from the winnings is considered and may reduce future child support payments. Either parent can request a reassessment if the windfall significantly changes financial resources – maintain records and disclose income earned from investments.
Change of Assessment Process
If either parent is fortunate enough to have a post-separation lottery win or otherwise receive a large amount of money due to an unexpected or chance event while paying child support, either party can request a Change of Assessment through Services Australia. We’ll look at the steps of this process below.
How To Apply
- Log in to myGov (linked to Services Australia) or call the Child Support Enquiry Line.
- Submit a Change of Assessment request with evidence of the windfall and any income it produces via this link https://childsupportapplication.servicesaustralia.gov.au/.
- Explain how the windfall affects the other parent’s financial capacity.
What Services Australia Considers
- Whether the windfall creates ongoing income or materially changes financial resources.
- The overall circumstances of both parents.
- Obligations to provide proper level of support to their children.
- A one-off lump sum may impact the level of child support payable/receivable even without immediate income.
Possible Outcome
- Child support payable may be increased or decreased if assessable income changes.
- Adjustments can apply from the date the change actually occurred (which may be many months ago) which may create a child support debt in some cases.
Practical Tips
- Keep thorough records of financial statements, investment income and communication;
- Only apply for a change of assessment if the windfall genuinely changes financial capacity/circumstances; and
- Seek legal advice.
- Relevantly, the objects of the Child Support (Assessment) Act 1989 (Cth) (“CSA”) state the CSA should ensure that:
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- The level of financial support to be provided for children should be based on the financial capacity of each parent. Parents with a like capacity to support their children should provide like amounts of financial support;
- The level of financial support that is provided by parents for their children should be determined in accordance with the costs of the children;
- Parents and carers who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need for court proceedings;
- Children share in changes in the standard of living of both of their parents, whether or not they live with both or either of them; and
- Apustralia is in a position to give effect to its obligations under international agreements or arrangements which relate to maintenance obligations arising from a family relationship, parentage or marriage.
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Need Help With Child Support Matters After A Significant Financial Change?
Unexpected windfalls, such as lottery winnings or other significant changes in financial situations, can complicate child support and property matters. Speak with Pearsons Lawyers to understand how changes like this may affect your obligations and entitlements. Get clear, expert guidance to know where you stand and protect your financial position. Call 1300 699 688 or get in touch with our team via our contact form attached to book a complimentary first appointment.
